Internal audit is an assessment of an organisation's activities carried out by its own staff in order to make management more effective and improve risk control. It aims to make information more reliable and to ensure that the organisation's activities comply with the law and internal policies, as well as with quality standards, requirements for working conditions and the expectations of clients or buyers.
The main goals of internal audit include:
Internal audit makes operations more transparent, improves the management system and helps management make well-founded decisions. It provides an objective assessment of business processes, the production environment and working conditions, and supports the development of growth strategies.
External audit is an independent review of an organisation's financial statements and other aspects of its activities, including production conditions, product quality, working conditions and compliance with customer requirements. It is carried out by third-party auditors to confirm that the information is reliable and complies with legal requirements and standards.
The main goals of external audit:
The organisation must:
The auditor:
External audit increases the confidence of investors, partners and regulators in the financial statements and in the organisation's activities as a whole. It helps improve financial management, quality control, production and working conditions, and reduces the risk of non-compliance with the law and customer requirements.
| Criterion | Internal audit | External audit |
|---|---|---|
| Nature of the work | Collecting and analysing information on the work of departments or business processes within the company | Forming an independent opinion on the reliability of data and compliance with regulations, and analysing processes |
| Who conducts it | Permanent employees, in-house specialists | Auditors from an external, specialised and independent organisation |
| Qualification requirements | Usually not mandatory | An auditor's qualification certificate is mandatory; audit firms must be members of a self-regulatory organisation (SRO) |
| What is checked | Internal processes, departments, functions, management, production and working conditions | Financial statements and other areas agreed with the client |
| Main objective | Analysing effectiveness, compliance with internal rules and the law | Confirming the reliability of the financial statements, assessing compliance with the law and identifying scope for optimisation |
| Legal basis | Internal company regulations and procedures | Federal laws, international and national standards |
| Payment | Covered by regular salaries | Under a contract with the audit firm |
| Frequency | Regularly, according to plan or as needed | Once a year, or more often by decision of the owners or as required by law |
| Impact on the business | High: influences management decisions and helps improve efficiency | Limited: records the results of management actions already taken |
| Independence | Dependent on company management | Fully independent, works under a contract |
| Who uses the findings | Management, control functions, operational managers | Investors, banks, tax authorities, partners, regulators |
Internal audit helps to identify problems and risks early, improve processes and prevent violations, which supports effective management of the organisation.
An internal audit can be carried out by the organisation's employees, internal audit specialists or external experts with the necessary knowledge and experience.
The frequency of external audits depends on legal requirements and the organisation's needs, but they are usually carried out annually.
When choosing an audit firm, consider its experience, reputation, licences and certificates, as well as client reviews.
The auditor's report contains the auditor's opinion on the reliability of the financial statements, the violations identified and recommendations for remedying them.
