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The Major Differences Between In-house Audits and External Audits

Both internal and external audits help organizations ensure that their financial reporting is aligned with accounting principles, that internal controls are working correctly, and that the organization is in compliance with relevant laws and regulations. Below we discuss several differences between in-house audits (internal) and external audits.



Definition, Appointment, and Reporting

An internal audit checks a company's internal controls, corporate governance, and accounting processes. Internal auditors are usually employees of the organization. The internal audit department reports internally to relevant managers with recommendations, and ultimately reports to the audit committee or the board.


An external audit is an examination that is conducted by an independent accountant or accounting firm. This type of audit is most commonly intended to result in a certification of the financial statements of an entity. External auditors are appointed by corporate shareholders and report primarily to the shareholders. Some of the reasons your organization may be required to have an external auditor are: government compliance, credibility, fraud prevention, and/or process improvement.



Which Audit to Choose for your Business?

Depends on your organization’s needs. An internal audit will provide you with results that examine your processes and controls. On the other hand, external auditors don’t work directly for your company and aren’t going to be influenced by any pressure you may use to get a favorable audit. In addition, an external auditor’s approval of a financial statement is more credible than an internal auditor’s approval. Both audits are crucial for every organization, and supplement each other.


We know you already manage many responsibilities in your business, allow us to take on the accounting responsibilities. At CPA by Choice, we can advise you on which audit will benefit your business. Find out how our professionals and personalized services can save you time, money, and frustration with managing your accounting, and tax needs. We are available to answer your questions, feel free to call us or send us a message.


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