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Assignment to Advance Auditing Task: Difference Internal and External Audit. Submitted to: Hammerheads Bushmasters Section: AY Roll No: 0072 Submitted by: Definition Of Audit: “An audit Is a person appointed to examine the books of account and the account of the registered company and to report upon them to company member” Types Of Audit: * Internal audit * External audit. Internal auditor: “An authorized person appointed by the management to check the internal affairs of the organization not mandatory by law’ According to Professor Walter B.
Megs: Internal auditing consist of a continuous, critical review of financial and operating activities by a staff of auditors functioning as full time salaried employees. Introduction: Internal audit Is the Independent appraisal of activity within an organization for the review of accounting, financial and other business practices as protective and constructive arms of management. It is a type of control which functions by measuring and evaluating the effectiveness of other type of controls. Essentials of Internal Autodial .
Planning Planning is an essential feature of internal audit. The auditor can plan to check the accounts system. The plan may relate to accounting functions like purchase, sales. Income, expenses and shares. The planning includes degree of risk and extent of audit. It also states the nature of audit work. 2. Controlling Controlling is an essential feature of internal audit. The auditor examine the ‘OFF operation AT accounting system. He can control audit work tongue audit programmer. The whole work is distributed among audit staff. 3.
Independence Independence is essential element of internal audit. An employee of the company does the work of internal audit. Management must not influence him. He must be free in developing audit programmed, audit investigation and audit reporting. 4. Staffing Staffing is an essential part of internal audit. The trained staff is needed to conduct internal audit. The reasonable number of persons can perform the work of examination. The inadequate and untrained staff cannot serve the purpose of checking efficiency of managers. 5. Training The internal audit staff must be trained.
In order to achieve better results there is a need of training in audit work. Proper arrangements should be made to provide training to internal audit staffs. Relationship The internal audit staff must have friendly relations with management, external audit staff and consultants. There is a need of complete harmony among various groups of people. 7. Due care Due care is an essential part of internal audit. The auditor must use skill, care and judgment. He should have technical knowledge, honesty and integrity. 8. Reporting Is an essential part of internal audit.
The auditor can inform the management through audit report. It may be long or short report. The finding of the auditor is put before the management. There is a need to act upon the advice of the internal auditor for otter resultantly Audit:”A person appointed by the board of the directors, shareholders or SEEP under CO. Ordinance 1984 sec 252 known as an external audit. ” I I Role, appointment, remuneration and assessment of External Auditor The External Auditor is appointed each year by the Annual General Meeting of Shareholders.
The Supervisory Board shall nominate a candidate, based on advice from the Audit Committee and Executive Board. The remuneration for the External Auditor is proposed by the Audit Committee and approved by the Supervisory Board after consultation with the Executive Board. The Supervisory Board has delegated approval for the assignment of services from the External Auditor to the Audit Committee for a period of one year. This delegation can be renewed by the Supervisory Board Function fan Auditor: Some important functions of the auditor have been below: 1.
Engagement of Audit: It requires that the auditor must send the letter of engagement to the management. Letter of engagement clearly sets the scope and objective of his work and the report to be issued. 2. Knowledge of Business: International standard of auditing require obtaining sufficient knowledge regarding the key areas of the business. 3. Assessment of Internal Control System: The auditor should asses the system to have assurance that the internal control system exit and work properly. Befog internal control systems work properly the auditor can apply less extensive procedure. 4. Frauds and Errors: Auditor should consider the risk of material misstatement due to the fraud and error. The errors are easy to identify while it is difficult to locate the frauds because they are Intentional Ana usually arrangement are mace to conceal teem. Expression AT Opinion: The auditor express his opinion through the report called the auditor’s report auditor port should be clear written expression of his opinion on the financial statements. 6.
Planning Of Audit: Audit is a series of planned task. Sis planning requires before the commencement of an audit the auditor should plan the audit work. From my learning I conclude the following difference between internal and external auditor. Internal Auditor I External Auditor I 1. Objectifications of internal auditor is to detect the fraud and errors but management can direct the internal auditor to perform in a particular function. I The basic objective of the external audit is to enable the audit to express an opinion n the financial statement.