Internal vs. external audit | Technical Resources | ICAS
Seven differences between internal and external audit are listed here. authority and responsibility is defined within their Audit Charter. The relation between internal audit and audit fees has also received .. assets, the mean size of non-financial listed companies in Australia for that year was. Request PDF on ResearchGate | External Audit and Relation between Internal Auditors, Supervisory Body and External Auditors of the Banking.
Similarly, the SEC issued rules to exclude any member who is not independent i. In addition to independence, competency is also taken into consideration as regards the composition of audit committee members. Consequently, we will be looking at three features of such meetings, as follows: Even though it is very important for the audit committee meetings to be frequent, it is noted that most of the organizations do not meet frequently [ 15 ].
Many committees meet on a monthly basis, while others meet on a quarterly basis or even a semi-annual basis. According to the American Bar Association codes ofthe minimum number of meetings is twice a year but this number has been increased to four times a year according to the BRC codes of [ 4 ]. In Europe, the codes are silent on this issue; however some European States, such as the United Kingdom and the Czech Republic, recommended that these meetings are to be times per year.
The frequency and duration of these meetings have to be according to the size of the organization and the number and size of issues to be discussed during such meetings.
The Relationship Between Internal & External Audit
Consequently, while four times a year could be too much for some organizations, twelve times a year could be just sufficient for others. However, what is more important than the frequency of the meetings is the content and results of such meetings [ 16 ].
In addition to the less-frequent meetings held by many audit committees, it is noticeable that not all of the members attend these meetings. However, the attendees should not be limited to the committee members.
The audit committees invite CEOs, internal auditors, external auditors, regulatory bodies, finance directors, and relevant others, to attend such meetings, with whom the committee members discuss issues related to the organization. The minutes of the meetings should be noted by a specified person describing the issues that have been discussed, the results the attendees reached to, and the relevant decisions that have been made. Additionally, the audit committee participates fully in determining the fees that would be paid to the external auditors.
External auditor - Wikipedia
Appointing or terminating the head of the internal audit department, or at least issuing relevant recommendations, is also part of the committee activities. The scope of the internal and external audit functions are also determined by the audit committee. However, in this section of the paper, I would focus only on its relationships with internal auditors and external auditors [ 25 ].
Relationships with internal auditors Listing all the tasks of the internal auditors is beyond the scope of this paper. However, I would refer to the tasks that are directly related to the audit committee activities as follows: The relationship between the audit committee and the internal auditors is important for both parties to fulfill their job commitments [ 26 ].External Audit Vs Internal Audit by kultnet.info
The audit committee is concerned with recruiting and terminating the head of the internal audit, and the frequency and duration of the meetings with the internal auditors [ 27 - 29 ], as well as ensuring that the internal auditors, especially their head, can communicate directly with the audit committee anytime.
Whereas the oversight of financial reporting and the monitoring of the internal audit performance are two of the main activities of the audit committee, it is mandatory that the audit committee members, or at least one of them, should have the financial or accounting expertise in order to understand the technical and control issues related to the internal audit to enable the audit committee to review the internal auditors activities and the results they reach to.
Whenever there are problems or obstacles, the audit committee performs the necessary investigations using internal feedback, its expertise, and external consultations if needed. Two important related issues i. Relationships with external auditors Likewise, listing all the tasks of the external auditors is beyond the scope of this paper. Changing the external auditors also requires direct interference by the audit committee.
The AICPA requires that external auditors communicate with the audit committee formally as a main part of the audit performance [ 32 ].
Additionally for independence purposes [ 33 ], the audit committee may review any non-audit service agreements with the external auditors to understand the nature and magnitude of relevant fees paid. Appointments The post of statutory external auditor is an office to which the holder is appointed by an ordinary resolution of the members in general meeting see Companies Act section Internal auditors may be employees of the organisation being audited.
The chief duty of the external auditor is to carry out sufficient work to enable them to express an independent opinion to the members upon a set of the financial statements and whether these show a true and fair view.
The internal audit function's purpose, authority and responsibility is defined within their Audit Charter. The work of internal audit gives the audit committee and the board assurance to help them to fulfil their governance and stewardship duties to the organisation and its various stakeholders.
Internal audit may also carry out advisory and consulting work, where the aim is to support management in improving systems and controls.
Reporting responsibilities External auditors are responsible to the shareholders or, in the public sector, ultimately to a legislative body such as Parliament. They are not responsible to the management of the body being audited and management do not direct the extent and scope of their audit work. Internal audit is required to be independent of management and to report functionally to the board, normally through the audit committee.
To safeguard their independence, internal audit should not have operational responsibilities. Reporting format External auditors use formats prescribed in auditing standards when reporting their audit opinion, in legislation as a basis for their opinion, and, if applicable, Listing Rules. Internal auditors can publish their reports in any format. They are not prescribed by legislation to use a specific format or wording. Internal audit reports are not available to the public but are often requested by regulators.
- Position paper: Internal audit's relationship with external audit
- The relationship between external audit and internal audit
- The working relationship between external audit and internal audit
The reports are addressed to the audit committee if one exists the board of directors and management of the area being audited.