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1. Internal audit -
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. The main activities in internal audits are
a. Evaluating the internal controls
b.Evaluating risks
c. Analysing operations and confirm the effectiveness.
d. Review compliance.
EXTERNAL AUDIT is an audit conducted by an individual or firm that is independent of the company being audited. These independent auditors audit the books of a company generally once per year after the completion of the companys fiscal year. Their role is to give an opinion of the financials statements reflection of the status and operations of the company being audited. Based on what they witness during the audit they will also produce, for management and board utilization, a management letter. Although a financial statement audit is the most common type of external audit, external auditors may also conduct special purpose audits which might include; performing specific tests and procedures and reporting on the results, a less intensive review, and compilations.
The importance of internal auditing:
The importance of internal audit in being effective control helps enterprise management and owners to raise the quality of
Business and performance evaluation, and maintain the property and assets of the institution, as well as it is the eye and ear of the External Auditor, and the most important institutional control mechanisms, so it has emerged and evolved and increased its importance as a result of the combined group
Of factors are as follows:
1 large size installations and multiple operations.
2 forced management to delegate powers and responsibilities to some sub-departments of the institution.
3 Enterprise Manager needed to patrol and accurate data to draw the policies, planning and work decisions.
4 Enterprise Manager need to protect and maintain the enterprise funds from fraud, theft and errors.
5 need for government agencies and others to accurate data for economic planning, government censorship, and pricing.
6 evolution of the review of the complete detailed a test procedure based on statistical sampling method.
External audit objectives
Where the main objectives of the external audit in the following
1. The primary objective of the external audit process is to express an opinion neutral artistic expression of the sincerity of the financial statements as a result of the business and financial position, in accordance with accounting principles generally accepted and generally accepted.
2. Enterprise Manager or supply the company with information about the internal control system, and the statement of deficiencies which, through recommendations by the references in the report in order to improve the performance of this system.
3. supply users of the financial statements of investors and creditors, banks and government departments concerned and other authoritative financial statements, to help them make the right decisions.
Complementarities
The complementarities between the internal auditor and external auditor and wide, and is compounded mutual trust and full potential and knowledge, which is deduced by evaluating each other's work. There is no doubt that this integration leads to concerted efforts to achieve the goals of both efficiently and effectively, for the benefit of the institution of the External Auditor's reliance on the work of the internal auditor
There is no doubt that the internal auditor has a role in helping the external auditor in understanding the functions of the internal control system, as well as the establishment of an efficient and effective control system, and this has been confirmed by the Commission on Professional organizations The
Committee of Sponsoring Organization of the tread way commission.
In its report, where stimulated internal auditors to work closely with management and external auditors on these things
- Define the concept of internal control objectives associated with them.
- Identify the internal control components.
- Identify appropriate for measuring the efficiency and effectiveness of the internal control system evaluation tools.
- Periodic monitoring and ongoing internal control system, to make sure that the goals set have been achieved
Internal Audit:
Is the function of an independent evaluation arise for examination and evaluation of all activities of the organization as a service {according to this definition, we find that the goal of the review is a service organization as a whole and not just management service
The need for internal audit in the project:
The need for this type of review within the same project in Europe emerged after the global crisis1929/1933 and in the United States and other countries and the impact that a number of these companies in these countries for bankruptcy and download the managements of these liability companies to the lack of an effective system of internal control, which required the presence of effective review to ensure the existence of systems of internal control and appropriate good and this review is the internal audit that can through examination and continuous track of all the activities of the project and inform the management of the fact that the project conditions, and provide them with the findings and recommendations that aim to address any defect or improve any action it takes the whole project organization.
External audit:
Operations of a comprehensive review of the books and other accounting records for works, by staff from abroad do not belong to this body, in order to verify that the accounting records accurate, complete and comprehensive, as it may be implemented external audit process in order to confirm the internal audit, or results to verify the fact that accurate accounting practices and legal.
The importance of the external audit in:
1. internal audit and evaluate the performance of emphasis and documented; as happens in cases of financial audit, which needs the bank for a certain company had applied for ensuring financial conditions included in the internal audit reports of investment loans.
2. dealing with appeals from the beneficiaries against the decision makers; in any case you need to prove or deny the suspicions that might mar the internal audit reports; utilitarian own - to cover up wrongdoing Alokhtae- ... etc., are a kind of legal investigations intensive and accompanied by audit documents in the collection and analysis.
3. periodic follow-up public oversight; in order to update the information and enrich the work.
4. estimate the level of quality than comparable agencies at the local and international level, to put the organization in the correct order
As per S. A200 issued by icai, "Auditing is an independent examination of financial information of an entity, whether profit oriented or not, irrespective of size or legal form, when such an examination is conducted with a view to expressing an opinion thereon"
It helps to determine correct picture of operating results of an entity by statutory authorities, stake holders and other users of financial statement.
it helps to settle wage disputes between trade union and management.
Agreed with the answer, Mr. George
1- increase confidence to other external regulation such as taxes
2- trying to discover fraud
3- assure that financial statement is comply with GAAP
nice answer Mr Raman
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