External and internal audit: what is the difference?

The word audit means different things depending on who the work is for. The two most common are external audit and internal audit, and understanding the difference helps you buy the right assurance.

An external audit is an independent examination of your financial statements. Its purpose is to give an opinion, to outside stakeholders such as shareholders, banks and regulators, on whether those statements present a true and fair view. It is often a statutory requirement.

An internal audit is carried out for management. It is an ongoing, risk-based review of your internal controls, processes and governance, designed to reduce risk, deter fraud and improve how the business runs.

In short: an external audit looks backward and outward to give assurance to others; an internal audit looks forward and inward to help you run a tighter operation. Many growing companies benefit from both.

M.W. & Co. provides independent external audits and risk-based internal audits, but not to the same client where that would affect our independence. Get in touch to discuss which is right for your organisation.

This article is general information, not advice. Contact us to discuss your situation.