24 Apr How is external auditing different from internal auditing
The auditing of the financial statements required verification on the statement prepared by the organisation or a legal entity in order to express an audit opinion. The audit opinion is provided so that all the stakeholders can get a reasonable assurance that the financial statements prepared by the organisation present a true and fair view of the current position and performance of the business. It also ensures that the financial statement of the company is prepared in line with the financial reporting framework applicable to them. The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. Auditing is a complex and detailed function and requires a lot of knowledge, understanding and working experience in this field. The students assigned auditing assignments by their teachers often get confused because of the intricacies involved in carrying out the task related to auditing assignment writing. It is advisable to get help from the assignment writing experts to simplify this task and to ensure that you do not lose out on your precious grades because of your lack of knowledge and understanding of the subject or of assignment writing. The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation. Some audits are named according to their purpose or scope. The scope of a department or function audit is a particular department or function. The purpose of a management audit relates to management interests such as assessment of area performance or efficiency. An audit may also be classified as internal or external, depending on the interrelationships among participants. Internal audits are performed by employees of your organization. External audits are performed by an outside agent. Internal audits are often referred to as first-party audits, while external audits can be either second-party, or third-party. In the course curriculum, the students are required to write assignments and research papers on both internal and external audits.
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Before beginning with this process, it is important for the students to understand the difference between the internal audit and external audit function of the organisation. The internal audit of the organisation is carried out by the employees of the company that are hired by the organisation itself. The purpose of conducting an internal audit is to improve the management function and there is no fixed report format or reporting regulations for the internal audit of the company. The internal audit report produced by the auditors is used by the management of the company for analysing the performance and for improving the decision making. Internal audit can also be used for consulting assistance or to provide advice to the decision makers of the company. The internal audit requires examination of the issues related to the business practices of the company and the business risks. There is no fixed duration in which the internal audit has to be carried out by the company and therefore the organisations conduct internal audit throughout the year at their convenience. The research reports related to internal audits of the company have to be prepared after going through the format followed by the organisation for Internal auditing and its reporting.
External audit for the organisation is conducted by an outside audit firm which is appointed through a shareholder vote. There has to be a CPA directing all the activities necessary for carrying out the external audit of the company and therefore the external auditors hold the responsibility to the shareholders of the organisation. The external auditors have to follow the specific format for presenting the audit opinion and for providing the management letters. Internationally, the International Standards on Auditing (ISA) issued by the International Auditing and Assurance Standards Board (IAASB) is considered as the benchmark for audit process. Almost all jurisdictions require auditors to follow the ISA or a local variation of the ISA. The external audit reports are used by the investors, creditors, lenders and all the other stakeholders of the company. The external auditors of the organisation are constrained to provide support to the audit client very closely and have to present an independence declaration. External auditors examine the financial records and issue an opinion regarding the financial statements of the company. They conduct a single annual audit and if the client is publicly-held, external auditors will also provide review services three times per year. Therefore, the research reports and assignments related to the external audits are generally more detailed and include a lot of evidence, assertions and benchmarks that can be easily compared with the financial reporting standards.