Internal audit External audit Differences

1. SUBJECT: AUDITING
TOPIC: INTERNAL AUDIT AND
EXTERNAL AUDIT
SUBMITTED BY
VEDAVATHI M N
1 ST M.COM.

2.  INTERNAL AUDIT
• A system of examination of books of accounts and financial transactions by employees of the
same organization, is know as ‘internal audit’ an internal auditor may not be a qualified auditor.
EXTERNAL AUDIT
• An independent examination of books of account of an enterprise by a qualified professional
auditor is known as an external audit.
• External audit is also known as an independent audit

3. Differences between internal audit and
external audit
BASIS OF
DIFFERENCE
1. Appointment
2. Legal requirement
3. Qualification
INTERNAL AUDIT
1. An internal auditors is
appointed by the entity
management.
2. Internal audit is the need of
management .is required law it
is not mandatory
3. Does not require specific
qualification as per provisions
of law
EXTERNAL AUDIT
1. An external auditor is
appointed by the share
holders in the annual
general meeting.
2. Is required by laws. It is
mandatory as per legal
provisions
3. His qualification is
specifically determined. He
must be a chartered
account.

4. 4. NATURE OF AUDIT
5. STATUS
6.STATUS
4.INTERNAL REGULAR IN
NATURE.
5.AN INTERNAL AUDITOR IS A
REGULAR EMPLOYEE OF AN
ORGANIZATION APPOINTED BY
THE ENTITY MANAGEMENT.
6. AN INTERNAL AUDITOR
EXAMINES THE BOOKS OF
ACCOUNTS AND OTHER
ACTIVITIES OF AN
ORGANIZATION REGULARLY.
4.EXTERNAL AUDIT IS
CONDUCTED AFTER THE
PREPARATION OF FINAL
ACCOUNT.
5.AN EXTERNAL AUDITOR IS AN
INDEPENDENT PERSON. HE IS
APPOINTED BY SHARE HOLDERS
INCASE OF COMPANIES.
6. AN EXTERNAL AUDITOR
EXAMINES THE BOOKS OF
ACCOUNT AND VERIFIES THE
RELATED DOCUMENTS TO CHECK
IRREGULARITIES.

5. 7. REMOVAL
8.REMUNERATION
9. INFLUENCE
10. REPORT
7. AN INTERNAL AUDITOR CAN BE
REMOVED BY THE MANAGEMENT AT
ANY POINT OF TIME.
8. AN INTERNAL AUDITORS
REMUNERATION IS DETERMINED BY
THE MANAGEMENT ,SINCE HE IS AN
EMPLOYEE OF AN ORGANIZATION.
9. AN INTERNAL AUDITOR IS
INFLUENCED BY THE MANAGEMENT.
10. AN INTERNAL AUDITOR NEEDS TO
GIVE ADVICE FOR IMPROVEMENT IN
ACCOUNTING WORK . HE NEED NOT
PREPARE ANY KIND OF REPORT.
7.AN EXTERNAL AUDITORS CAN BE
REMOVED BY SHAREHOLDERS IN THE
GENERAL MEETING.
8. AN EXTERNAL AUDITORS
REMUNERATION IS DETERMINED BY
THE SHAREHOLDERS .
9. AN EXTERNAL AUDITOR WORK IS
NOT INFLUENCED THE BOARD .
10. AN EXTERNAL AUDITOR NEED TO
PREPARE AUDIT REPORT AT THE END
OF AUDIT WORK AND PRESENT SUCH
REPORT TO THE APPOINTING
AUTHORITY.

6. THANK YOU