Page 254 - F1 - AB Integrated Workbook STUDENT 2018-19

Chapter 16

Internal auditing and external auditing

6.1 Differences between internal and external audit

The external audit focuses on the accounts, providing the shareholders
with an independent opinion on whether the financial statements are true
and fair and properly prepared.

Internal audit is much broader in scope, covering any aspect of the
company’s operations. Internal audit may use similar techniques to
external audit, but the objectives are different.

External audit Internal audit

Required by Company law Board of Directors/Audit
Committee

Appointed by Shareholders or Board of Board of Directors/Audit
Directors Committee

Reports to Shareholders Board of Directors/Audit
Committee

Reports on Whether the financial Adequacy of internal
statements are controls etc.

 True and fair

 Properly prepared.

Whether the directors’
report is consistent with
the financial statements

Scope of assignment Unlimited, to fulfil statutory Prescribed by
obligations management

248