Who are external auditors
External auditors are hired by and report to a company’s audit committee. Their historical objective has been to express an opinion on the fair presentation of the company financial statements in conformity with generally accepted accounting principles (GAAP) or International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). Their audit is completed in accordance with generally accepted auditing standards or International Auditing Standards (ISA). In America statutory audit standards are established by The American Institute of Certified Public Accountants (AICPA) but now under PCAOB.
An easy to remember distinction might be that they are responsible for attesting to accounting report issued to outside parties and investors while an internal auditor is responsible for reviewing inside business practices and internal accounting and process controls.
Internal Audit is defined by The IIA as an independent objective assurance and consulting activity designed to add value and improve an organizations operations. Internal auditors may be hired by and report to both management and the audit committee. Internal auditors assist management and the audit committee in identifying and evaluating key business risks, completing focused audits in high risk areas, completing special investigations for the board and management and at times assisting external auditors with parts of their work on the company’s financial statement. The scope of internal audit work is determined by the audit committee, management and the internal audit function itself. The standards internal auditors should follow in planning, executing and communication the results of their work are The IIA standards,
However, both external and internal auditors should collaborate to minimize duplication of effort. external and internal auditors work in tandem to help management and the audit committee ensures that a company’s financial reports and other information are accurate and that its system of internal control is effective.
The external audit team may consider and use the work of internal auditors in connection with their integrated audit of the financial statements of a company.
External auditors require certification unlike internal auditors