Internal audit

Internal auditors are usually hired by a company to audit itself, and are full time employees of the company. Internal audit services can be provided also by a third party company, including the Big 4.

Internal auditors:

• Help to design and test internal controls and processes
• Have zero materiality -i.e. every penny counts
• Report directly to the directors of the firm
• Sometimes work with external auditors to reduce the workload when performing an external audit.

Differences between internal and external audit

Principally, external auditors audit the financial statements whereas internal auditors provide assurance on the organisation’s control, risk management and governance processes.

External auditors and independent from the company and are hired to give an unbiased opinion. External auditors primarily check the financial statements only. External auditors have a high level of materiality. It is not their role to seek out fraud or design and implement internal control structures.

External auditors are hired by and report directly to the shareholders. Internal auditors, by contrast, are hired by the company itself and report to the board of directors.

External auditors have a number of clients, but cannot audit themselves. Consequently, they do not have to travel to clients but work at their office and branches.

The profession is unregulated, though there are a number of international standard setting bodies, such as the Institute of Internal Auditors (IIA).

See also: Audit & Assurance