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Internal auditing refers to an independent, consultation and objective assurance that improves and adds value to organization operations, helping obtain the organization's goals. Internal audit helps ensure that the company complies with the laws and regulations, helping maintain financial reports and data collection (Petridis et al., 2021). Additionally, internal auditing helps the management with essential tools that are effective in executing operations and problem identification that would lead to financial crises once identified in the external audit.
Based on the article, I have learned that internal auditing varies from the organization's compliance, operational, financial, and environmental activities. For instance, an operational audit helps control risk management in the business; hence this may be done more frequently to help in preventing any waste during production. Moreover, a compliance audit ensures that the company adheres to local laws, external policies, and government regulations. An environmental audit helps the company evaluate its impact on the environment (Petridis et al., 2021). In addition, an internal audit focuses more on the technology by reviewing the security measures or recovery of the systems. The effectiveness of the organization's plans depends on the extent to which the internal auditor evaluates each operation. The implication of this model in evaluating business management strategies helps organizations cope with the existing competitive business environment.
Difference between External and Internal auditor
- External auditors are responsible to the organization's shareholders, such as investors and creditors, unlike internal auditors, who are responsible to the organization's management.
- Internal auditors can be used to provide consultation assistance and advice to the employees, while external audit are restricted from giving advice (Petridis et al., 2021)
- An internal auditor can issue a report to the business in any form, unlike the external auditor, who only gives out the report in a specified format.
- An internal auditor provides auditing reports throughout the year, unlike the external auditor, who gives annual reports (Petridis et al., 2021).
- Based on report focus, an external auditor examines the organisation's annual performance, while an external auditor focuses on issues related to the company's daily practices and risks.
Reference
Petridis, K., Drogalas, G., & Zografidou, E. (2021). Internal auditor selection using a TOPSIS/non-linear programming model. Annals of Operations Research, 296(1), 513-539.
