Internal Audit vs External Audit

In today’s blog, we are going to be discussing the key differences between internal and external audits. For this, we will be looking at them individually and highlighting the importance of both in businesses.

Internal audit

An internal audit is part of an organisation that will look at risk management and corporate governance procedures. It consists of a neutral and objective evaluation of an entity’s internal controls, risk management, and governance. Internal auditors, who are employed by the company rather than a third party, conduct these assessments to ensure that the organisation's activities comply with all relevant laws, rules, and regulations.


Internal audits' main goal is to give management insightful analysis and recommendations for enhancing internal controls, reducing risks, and increasing overall productivity. To identify potential flaws and areas for improvement, the internal auditor examines operational procedures, risk management techniques, and financial reports and records. Through enhanced business practices, this proactive strategy assists organisations in protecting assets, improving operations, and achieving their strategic goals.


Internal auditors possess a comprehensive comprehension of the organisation's operations, procedures, and hazards, which empowers them to pinpoint particular aspects that require attention.

Advantages of Internal Audit

  • Internal auditing offers a tailored approach according to the business and highlights areas of concern to meet the company's goals and demands.
  • Internal auditing services can offer continual evaluations and insights that enable quick decision-making and real-time risk management.
  • In the long term, maintaining an internal audit management team could be more economical, particularly for larger companies with intricate operations.

Disadvantages of Internal Audit

  • Because of their close ties to the company, internal auditors may find it difficult to remain totally independent, which could compromise their objectivity and undermine their ability to form an objective opinion.
  • Smaller companies could find it difficult to set up a strong internal auditing department with enough knowledge and resources. Relationships that internal auditors have on a personal or professional level with staff members may give rise to biases that could influence the audit findings.
  • When it comes to specific topics, including complicated financial instruments or external transactions, internal audits may not have the resources or authority to look into them.

External audit

On the other hand, an external audit, also known as an independent audit, aims to offer a detailed and independent analysis of an entity’s financial statements. This is achieved by the use of an external auditing firm, i.e. there is no connection to the entity being audited, providing objectivity and independence. The prime goal of an external audit is to give an independent opinion on the entity’s financial statement by following laws and accounting standards. As a result, it will enhance and build the company’s trust among its stakeholders.

Advantages of External Audit

  • To guarantee objective assessments of financial records, external auditors must be impartial and independent. An organization's reputation among stakeholders and investors is improved when its budget and financial statements undergo an audit.
  • External audits make sure that laws and accounting standards are being followed.
  • They assist in determining possible areas for improvement in order to improve financial management as well as financial risks.
  • Prospective investors are reassured by a spotless external audit report.
Disadvantages of Internal Audit
  • Engaging outside auditors can be costly, particularly for smaller companies.
  • External audits may take a lot of time, which could interfere with ongoing business operations.
  • The auditing process may cause a disturbance to regular business operations and workflow.
  • Not all internal control aspects of the company may be covered by external financial audits.
  • It is possible that external auditors are not well-versed in the inner workings and ethos of the business.
In conclusion, both internal and external audits play an important role in the business, with the first aiming to enhance its efficiency and effectiveness by assessing its internal controls and risk management, and the second aiming to provide an independent and objective opinion of a business’s finances and financial statements, helping to build trust and confidence between the organisation and stakeholders.


Reach out to our team of experts for more information at info@cooneycarey.ie.