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Topics: Accounting outsourcing, Accounting outsourcing services provider, Audit, audit support, audit support services, Outsourcing

Internal Audit Vs. External Audit: Key Differences You Must Know

6 MIN READ | Posted on May 26, 2022
Written By Divya Ramaswamy

Audit support services: Learn the differences between Internal Audit and External Audit

From providing credibility to a set of financial statements to giving your shareholders the confidence that the accounts are fair and true, auditing can elevate your company’s internal controls & systems to a whole new level. While an independent body usually conducts an official inspection of an organization’s accounts, several large companies have internal departments offering audit support services. Despite sharing a common word and appearing seemingly similar, internal and external audits differ greatly.

For starters, An Internal audit is a department within a business monitoring the efficiency of its process & controls, and an external audit is an examination conducted by independent accountants. While the former’s function is crucial in larger organizations with high levels of process complexities, the latter is mainly intended to result in a certification of the financial statements of an entity.

The internal audit examines the effectiveness of an organization’s internal control. Its main objective is to add value, improve operations, and ensure that it complies with laws & regulations set by the government body. An external organization performs external audits to provide both business and government with a valuable check of the organization’s accounting.

Internal audits are not only limited to financial reporting controls but can also help you evaluate risk across all areas of your organization. At the same time, external audits are a “check-the-box” activity that provides a more proactive and consultative approach to assessing your organization.

An organization’s internal audit department conducts internal auditing. It is focused on evaluating the effectiveness of the organization’s internal controls, risk management processes, and compliance with policies and regulations. On the other hand, external auditing is performed by independent external auditors who the organization hires to provide an opinion on the accuracy and completeness of the financial statements. The objective of external auditing is to assure external stakeholders, such as investors, creditors, and regulators, of the reliability of the financial information presented by the organization. Both internal and external auditing are essential to effective corporate governance and risk management.

Although the internal and external audit functions are complementary and might need to work closely together, there is quite some difference between their purposes and areas of focus. Let’s look at how different these two types of audits are.

Internal Audit Vs External Audit

  • Comparing the Staff Factor
  • Comparing the Auditors’ Responsibilities
  • Comparing the Purpose
  • Comparing the End-Users of the Audit Reports
  • Comparing the Timelines
  • Comparing the Audit Focus
  • Comparing the Audit Scope


Company employees conduct internal audits, and external auditors work for an external audit firm. While the company hires internal auditors, external auditors get appointed by a shareholder vote. Certified Public Accountants (CPAs) must direct the activities of the external auditors, whereas internal auditors need not be CPAs. Internal auditors come from various professional backgrounds, while external auditors are certified, accountants or compliance professionals.


Internal auditors monitor, analyze and find the risk & control of the organization, whereas external auditors provide audit support services and independent opinions on an organization’s financial statements. Certifying the financial statement is an external auditor’s primary task. An internal auditor’s most important job is the ability to perform an impartial evaluation, promote ethics and help identify unbiased evaluation.


Internal audits assess the business’s risks and management effectiveness. At the same time, the objectives of external audits are defined by statute. Internal auditors perform advisory roles by issuing recommendations intended to support management in improving their controls and systems. And external audit support services provide an objective, independent examination and verify if the financial statements are per the accounting standards.


Internal auditors report internally to the board or the audit committee and will provide a tailored report on managing risks and objectives. And the external auditors report to the shareholders of the company. While internal audit reports aren’t available to the public, the external auditors’ reports are placed in the public domain via the annual financial statements.


Internal audits happen throughout the year, and external audits occur annually. However, external auditors provide review services thrice per year for publicly held clients.


Internal auditors holistically assess the organization’s health, determine if business practices support strategic objectives, and identify risks. On the other hand, an external audit’s focus accurately and fairly represents the organization’s financial performance. While external auditors look at past record-keeping and proofs of compliance, internal auditing is entirely forward-looking.


The internal audit function provides insights and suggestions encompassing risk, governance, and control processes, whereas an external audit occurs annually with a scope of compliance requirements.


While internal audits examine the “hows” and the “whats” of your processes and controls, external audit support services help analyze the accuracy of your balance sheet. Internal auditors deliver reports to an organization’s board members and other senior managers, whereas external auditors provide assurance primarily to shareholders. External auditors don’t work directly for your company and aren’t going to be swayed by any pressure you may use to get a good audit. An external auditor’s financial statement approval is more credible than an internal auditor’s. External audits provide an additional layer of control, enhance your company’s public image, and create transparency.

Internal audit isn’t compulsory, whereas external audit is. Internal audits can be conducted to review an organization’s operational activities, and the entity’s management determines the work area. The company decides the scope of an internal audit, but that of an external audit is fixed by law.


External audit improves internal systems & controls, provides credibility, and boosts shareholders’ confidence. The focus isn’t just on the numbers but will also help understand the business’s overall systems and control environment. When an external auditor verifies your financial statement, it can increase credibility in the business marketplace. Moreover, an independent review of the financial statements offers transparency to the shareholders that the company is being run within their best interests.

Despite being time-consuming and high-cost, an external audit can benefit your organization. It builds the trust of the investors and shareholders and is a chance for a company to improve itself, get more efficient, and protect itself from fraudulent activities. External audits can bring a new perspective and throw up areas where the company can be more cost-efficient.


Both internal auditing and external auditing are crucial for every organization, and in fact, they supplement each other. They both play a vital role in the organization’s effectiveness as it gives an accurate, honest view of the financial statement. However, external audit support services play a critical role in certifying the integrity of an organization’s financial statement and checking internal auditors’ work to reassure the reliability of internal control.  


Equipped with a dedicated team of accountants that make audits highly profitable, the QXAS audit support team is here to take the tedium of auditing alongside freeing up your time for new clients and helping your firm scale up!


      • Less tedium and more precision are guaranteed with highly qualified accountants in place
      • Over 12 years of experience in audit support services and accounting outsourcing
      • India’s first GDPR-compliant accounts outsourcing company
      • Listed under IAOP’s top 100 global outsourcing list
      • 100% quality and security assured as we are fully compliant with ISO 27001 for information security and ISO 9001 for quality.

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We hope you enjoyed reading this blog. If you want our team to help you with your audit procedures so you can focus on and transform your business operations, book a call.

Originally published May 26, 2022 11:05:17, updated Mar 31 2023

Topics: Accounting outsourcing, Accounting outsourcing services provider, Audit, audit support, audit support services, Outsourcing

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