Question

In: Accounting

Which do you think is more important: the internal auditor or the external auditor?  Why?

Which do you think is more important: the internal auditor or the external auditor?  Why?

Solutions

Expert Solution

First, we shall examine the characteristics and duties of both of the auditors:

Internal Auditor

Internal auditors work within an organisation and report to its audit committee and/or directors. They help to design the company’s organising systems and help develop specific risk management policies. They make sure that all policies implemented for risk management are operating effectively. The work of the internal auditor tends to be continuous and based on the internal control systems of a business of any size.

External Auditor

  External auditors are independent of the organisation they are auditing. They are often appointed for tax requirements . They report to the company’s shareholders. They provide their experienced opinion on the truthfulness of the company’s financial statements and perform work on a test basis to monitor systems in place.

Who is more important?

The answer to this question depends on two sections:

1) Company:

For a corporate, I think Internal Auditors are more important as they are necessary for the day to day operations of business and achieving targets. They also provide information that is necessary for External Auditor . So Internal Auditor turns out to be more important.

2) Shareholder

The External Auditor is the one who reports to the company's shareholders on the accuracy of the reports of Financial Statements and profit disclosed by the company. So to the shareholders they are the most important.

But it must also be considered that the external auditors won't be able to do anything if the internal auditor haven't done his work properly. So on a whole, internal auditor plays the most important role.


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