Fact Sheet

Internal Audit versus External Audit

 Auditors of all types must be incisive, focused and diligent with a strong sense of purpose, integrity and ethics.
 However, the difference between Internal Audit and External Audit is not always well-understood.
 The IIA–Australia, the professional body for Internal Auditors in Australia, has put together this Fact Sheet to help explain
the key differences.

External Audit Internal Audit

Appointed from outside the Employees of the organisation, or can be

organisation (independently Status an independent entity through outsourced
appointed in the public sector). or co-sourced arrangement.

Independent of management and the Independent of activities audited, but able

governing body (including board of Independence to respond to the needs of the audit
directors). committee and management.

Serves third parties that need reliable

financial information, including
Serving Serves the needs of the organisation.
shareholders (corporate sector) and
parliament (public sector).

Audit committee functionally for

Shareholders and board of
Reports to operations and chief executive officer
directors.
for administration.

Varies according to the audit; focused on

True and fair view of financial evaluating controls designed to assure
Objective
statements. the accomplishment of the organisation’s
goals and objectives.

Historical events as expressed in the

financial statements.
Focus Forward-looking.

Reviews records supporting the Reviews governance, risk management,

financial statements (usually Coverage and control processes according to risk-
annually). based need.

Help organisation to enhance and protect

Opinion on financial statements. Outcome organisation value and accomplish
objectives.

Incidentally concerned with

prevention and detection of fraud in
Is directly concerned with the prevention
general, but is directly concerned Fraud
of fraud in any activity reviewed.
when financial statements may be
materially affected by fraud.

Shareholders, regulators, board of

Reports go to Management and audit committee.
directors and audit committee.

External audit standards. Standards Internal audit standards.

Not mandatory, though there is a shift in

some jurisdictions to require the chief
Mandatory. Qualifications
audit executive to have appropriate
qualifications and certifications.

© 2017 The Institute of Internal Auditors–Australia