Why do organizations need external auditors?

[Ulysses Kwaku Nubueke]

Most organizations recruited qualified and competent Internal auditors to ensure efficient operation of internal controls and to help management risks.

If these Internal Auditors are really working and are up to task, why should organizations pay money to hire external auditors to audit the organization again?

Thank you

[Acid]

Most organizations recruited qualified and competent Internal auditors to ensure efficient operation of internal controls and to help management risks.

If these Internal Auditors are really working and are up to task, why should organizations pay money to hire external auditors to audit the organization again?

Thank you

Hi Ulysses ,

Thank you for your question.

Basically the nature of work of internal auditor and external auditor is different from each other. The internal auditor checks the organizations internal control systems , their effectiveness and the business processes.

While the external auditor checks the financial statement of the business.

It is possible that Internal auditor might present a biased view as it would need to work closer with the management while the External auditor who have no interest in company will likley to provide a more authorative and unbiased report.

There are quite a number of differences b/w exernal and internal auditors.

Refer to GTG F8 Studytext to get more information!

I hope this helps

Acid

[sunset_corniche]

Hello,

There is a significant difference between Internal and External Auditors. As far as I know there are basically four differences between them.

Internal Auditors:


Internal Audit is conducted to add value and improve the organisation's operation.

Internal Auditors report to the Audit Committe formed by the Board of Directors.

Their work is related to the operation's of the organisation.

They are usually the employees of the organisation, though the internal audit function can be outsourced too.


External Auditors:


External Audit enables an auditor to express an opinion about the financial statements of the organisation.

They report to the Shareholders of the organisation.

Their work is related to the financial statements.

They should not be an employee of the organisation as this can lead to a compromise of their independence and so they should be independent from the management of the organisation.


External Auditors express an opinion about whether the financial statements shows a true and fair view of the organisation' financial position.
Whereas, Internal Audit is used to ensure that other internal controls are working satisfactorily.

Internal audit reviews the internal control system, risk management and legal compliance. While, external audit reviews the financial statements.

Internal Audit has got a wider scope than external audit because internal audit looks into all the aspects of an organisation and external audit just looks into the financial aspect of the organisation.

Hope it helps.