2024 King’s Speech: Audit Reform Announced by UK Government Government...
Merging a robust accountancy background with a passion for technical writing, Alex Hartley simplifies complex audit and tax topics.
Latest posts by Alex Hartley (see all)
- Choosing the Right Auditor for Innovate UK Grants - 15/01/2024
- The Importance of Audits for Innovate UK grants - 11/01/2024
- The Audit Requirements For Non-profit Organisations - 10/11/2023
The Key Differences Between Internal and External Auditing: A Comprehensive Guide
Contents
show
Introduction: Understanding Internal and External Audit in the Business Context
Audits are a critical component in the financial health of any organisation. They act as checks on financial reporting and internal controls, ensuring compliance with laws and regulations. In this article, we will delve into the key differences between internal and external audits, giving a detailed explanation of both.
What Is an Audit? A Brief Overview
An audit alludes to a process where financial statements, internal control systems, and related operations are examined by auditors. The audit aims to provide a true and fair view of the company’s financial health. In general, there are two main categories of audits: internal audit and external audit.
Internal Audit Vs External Audit: An Overview
Internal Audit: What It Refers To
An internal audit is conducted by the internal audit department within an organisation, or by an external body employed by the organisation itself. The purpose of an internal audit is to review the effectiveness of the company’s internal controls, including its corporate governance and accounting processes.
Scope of Internal Audit Work
Internal audit work involves evaluating risk management strategies, internal policies, and compliance with laws and regulations. The internal audit function aims to streamline internal processes and help the organisation in achieving its objectives.
Internal Audit Reports
An internal audit report is shared with the management and the board, and sometimes with external bodies (for example potential accountants). The auditors may also advise the management on how to improve the company’s internal controls and governance.
External Audit: An Examination by Third Party
Unlike internal auditors, external auditors are not employees or contractors of the organisation. An external audit is an examination of the company’s financial statements and related operations to ensure accuracy and compliance with accounting standards and regulations.
Scope of External Audits
External audits look at the company’s financial records to verify that they offer a true and fair view of its financial condition. The scope of their work is often stipulated by the laws and regulations that govern the audit process.
External Audit Reports
The external audit report is published and shared with shareholders and stakeholders. It is also a vital part of the company’s annual report.
The Jack Ross Team has been an absolute delight. Professional, nice and fast during the Audit procedure. Thank you Jack Ross Team.
Very good service from the Jack Ross Team. They gave us good advice and completed a very efficient audit. They have a friendly and competent team. I would surely recommend them.
Brilliant service from the Jack Ross team in setting up several companies in very quick time, along with providing associated accountancy advice. Can recommend wholeheartedly as a leading accountancy practice with a can-do attitude.
First class service for many years from a first class team. Highly recommended. Prompt, commercially aware, personable.
Been using Jack Ross for a number of years. Good clear advice and nice people to do business with.
Jack Ross is based in Manchester and provides tax planning and Xero accounts. They are a long-standing and well-regarded firm with an excellent reputation. They provide their clients with exceptional service and a wealth of advice. I have no hesitation in using their professional services.
Jack Ross has been my accountants since I set up my business in 2016. From the outset I was helped with advice, support and encouragement. I cannot commend them highly enough. Always on hand to answer any question and responsive to any changes in the economy which might concern their clients. I don’t have to worry about the financial side of my business as all of that is taken care of and dealt with by Umar and the brilliant team. If you are looking for a top class accountancy firm which maintains the personal touch they are for you!
I would recommend this account, knowledgable and helpful
I can confidently recommend Jack Ross Accountants. They are continually improving their service, greatly benefiting our company as well as me personally. The team at Jack Ross have helped suggest and set up innovative accounting software, adding training and support. This alone has been a massive step towards having more control and understanding of our company finances.
We have enjoyed a solid and constructive relationship with JackRoss and Can highly recommend them for accountancy services.
We have been working with Jack Ross for over two years and the service has been fantastic. They have a great and knowledgable team who have taken good care of us and our accounts.
Meeting to review annual accounts and discuss future plans. Very productive as they definitely talk my language - on reflection probably the best such meeting in recent years. Many thanks Umar and Jamie
Jack Ross has serviced my Personal Tax requirements for the last 5 years. During some complicated challenges their advice was excellent and the customer service second to none and left me with no doubt all was in hand.
Following a recommendation, I have used Jack Ross for all my accounting needs (including payroll) since the inception of my business over 12 years ago. The relationship has been completely hassle free and I greatly value their service, which goes well beyond preparation of accounts. Their tax planning advice has been really helpful and I have always felt that they have ‘got my back’. Can’t recommend them enough.
We have finally found the Accountancy firm that we have been looking for! We switched over to Jack Ross towards the end of last year and from the very first contact to the recent submission of our end of year accounts the service provided has been fantastic and has easily exceeded our expectations. Thank you!
Excellent service; very helpful people and work done much quicker than I expected.
I have used Jack Ross as my accountants for a number of years. Their service is professional and accurate. They deal with queries promptly and I can always get hold of the person I need to speak to. Their digital product has made a big difference to the efficiency of my business. I would not hesitate to recommend them.
Jack Ross have been my family and business accountants and financial advisors for over 50 years. The delivery of services is second to none and i would recommend them to anyone. We have also built up great friendships over the years, above and beyond that of a normal business relationship which i value greatly.
We have been looked after by jack Ross for a number of years. They have given us fantastic tax advise and helped our company grow from strength to strength. A & f
Excellent advice and an understandable explanation of a very complex area of tax and corporate law which other (so called) advisors managed to totally confuse me. Thank you.
I have had a relationship with Jack Ross for several years and continue to be impressed by the proactive support and diligent advice received across the breadth of the firm. Excellent at signposting.
Jack Ross have acted for our law company for over 5 years and have been professional, prompt, and knowledgable in all aspects of our dealing with them.
Key Differences Between Internal and External Audits
Objectives
Internal Audit: Focuses on risk management and internal control problems. The internal audit function aims to identify inefficiencies and recommend improvements, making it a valuable tool for management. Internal auditors also help in ensuring that the organisation is compliant with internal policies and any applicable laws.
External Audit: Provides a true and fair view of the financial statements. The primary objective is to provide an independent assurance that the management has presented a ‘true and fair’ financial picture of the organisation. External auditors must follow strict auditing standards and are legally responsible for their opinions.
Reporting
Internal Audit: Reports are shared with management and sometimes with external auditors. These reports are confidential and are intended for internal use to improve operations. They can cover a range of topics from financial statement accuracy to compliance with laws and regulations.
External Audit: Reports are shared with shareholders and are publicly accessible. The external audit report is an essential component of an organisation’s annual report and is available for public scrutiny. It is the auditor’s professional opinion on the accuracy of the financial statements.
Regulatory Compliance
Internal Audit: Helps ensure compliance with internal policies and procedures. Internal auditors evaluate the systems in place to protect assets, and they verify the integrity and reliability of financial and operational information.
External Audit: Ensures compliance with external laws and accounting standards. External auditors assess whether the financial statements are prepared in accordance with applicable accounting standards and offer a true and fair view of the organisation’s financial condition.
Auditors Involved
Internal Auditors: Are employees of the organisation. They are part of the company and often have a detailed understanding of its inner workings, which allows them to provide tailored recommendations.
External Auditors: Are not employees and are often part of an external audit firm. They maintain an independent stance, free from any internal influences, which lends credibility to their audit reports.
Frequency
Internal Audit: May be a continuous audit process. Depending on the size and complexity of the organisation, internal audits can be conducted monthly, quarterly, or even just annually.
External Audit: Generally conducted annually. However, some aspects of the audit work may be performed at interim periods throughout the year, depending on the organisation’s accounting period and complexity.
Summary: Understanding the Distinct Roles
Internal and external audits serve different purposes but are complementary. The internal audit acts as a preparatory mechanism for the external audit. Internal audit services are geared towards helping the organisation improve its internal processes and governance, while the external audit provides an impartial and independent view of the company’s financial statements.
Eager to ensure your organisation’s financial integrity with top-notch audit services? Complete the contact form below, and a Jack Ross Audit team member will get in touch to discuss your specific auditing requirements.
Merging a robust accountancy background with a passion for technical writing, Alex Hartley simplifies complex audit and tax topics.
Latest posts by Alex Hartley (see all)
- Choosing the Right Auditor for Innovate UK Grants - 15/01/2024
- The Importance of Audits for Innovate UK grants - 11/01/2024
- The Audit Requirements For Non-profit Organisations - 10/11/2023
The main objective of an internal audit is to focus on risk management and internal control issues within the organisation. On the other hand, an external audit aims to provide a true and fair view of the company’s financial statements.
Internal auditors are employees of the organisation and focus on internal controls and compliance. External auditors are usually part of an external audit firm and provide an independent assessment of the financial statements.
Internal audits may be a continuous process and can occur at various intervals depending on the organisation’s needs. External audits are generally conducted annually to provide a comprehensive financial overview.
Client Testimonials
Explore the success stories of audit clients we’ve helped achieve great things.
The Jack Ross Team has been an absolute delight. Professional, nice and fast during the Audit procedure. Thank you Jack Ross Team. Engaging with the Jack Ross Team for our audit was one of the best decisions we've made this fiscal year. I was particularly impressed with their swift and streamlined audit process. Unlike other firms that drag on for weeks, Jack Ross was able to conclude our audit in record time without cutting corners.
Their professionalism is unparalleled; from initial consultation to final report, every interaction was marked by courtesy, respect, and a deep understanding of our unique business needs.
But what surprised me most was their warmth and friendliness; they made a typically stressful process feel almost enjoyable. It's refreshing to work with a team that combines speed and efficiency with such high levels of customer service.
If you're looking for an audit service that respects your time without compromising on quality, then look no further than Jack Ross Audit.
Their professionalism is unparalleled; from initial consultation to final report, every interaction was marked by courtesy, respect, and a deep understanding of our unique business needs.
But what surprised me most was their warmth and friendliness; they made a typically stressful process feel almost enjoyable. It's refreshing to work with a team that combines speed and efficiency with such high levels of customer service.
If you're looking for an audit service that respects your time without compromising on quality, then look no further than Jack Ross Audit.
Sofia Carlini
Financial Controller
Excellent service from the Jack Ross Audit Team. They gave us good advice and completed a very efficient audit. They have a friendly and competent team. I would surely recommend them.
I've always considered auditing a cumbersome process, but my experience with the Jack Ross Audit Team has completely changed my perspective. Their service was impeccable from start to finish. The team not only offered us invaluable advice to streamline our financial systems, but they also executed an extremely efficient audit that was far less intrusive than I've experienced in the past.
What truly sets Jack Ross Audit apart, however, is their team. Each member we interacted with was incredibly competent and genuinely friendly and approachable. They made us feel like a valued client rather than just another case file.
If you're unsure which accounting firm to choose for your audit, I can't recommend Jack Ross Audit highly enough. Their blend of professionalism, efficiency, and genuine care for their clients is rare in the financial world.
I've always considered auditing a cumbersome process, but my experience with the Jack Ross Audit Team has completely changed my perspective. Their service was impeccable from start to finish. The team not only offered us invaluable advice to streamline our financial systems, but they also executed an extremely efficient audit that was far less intrusive than I've experienced in the past.
What truly sets Jack Ross Audit apart, however, is their team. Each member we interacted with was incredibly competent and genuinely friendly and approachable. They made us feel like a valued client rather than just another case file.
If you're unsure which accounting firm to choose for your audit, I can't recommend Jack Ross Audit highly enough. Their blend of professionalism, efficiency, and genuine care for their clients is rare in the financial world.
Katrien Vanassche
Financial Director
Get a Personal Consultation
Office
Jack Ross Chartered Accountants, Barnfield House, The Approach, Manchester, M3 7BX
Open Hours
Monday-Friday 8:30 am - 5 pm
Latest News
Learn about the critical audit requirements for non-profit organisations to...