Internal and external auditing in Dubai

Internal and External Audits

The Difference between Internal and External Audits

Auditing consists of a very crucial notion of ensuring that the company is able to keep a clean record of their accounts, and the overall managerial controls that are in place. The overall efficacy of a proper well-managed accounting system is reflected in the overall financial statements, in the form of lesser leakages, and higher efficiency ratio for the organization. However, there are certain notable differences between internal auditing and external auditing in Dubai that must be taken into account in this regard.



Firstly, it can be seen that internal auditors can be classified as company employees, whereas external auditors are known to be hired from an outside firm. Therefore, they do not form part of the payroll of the given organization. In the same manner, given the fact that they are classified as employees, therefore internal auditors are hired by the company itself. However, on the contrary, it can be seen that external auditors are mostly hired by a shareholder vote.



In the same manner, internal auditors are not required to be CPAs. On the other hand, CPAs are required to direct the activities of other external auditors. Another differentiating aspect is the fact that internal auditors are directly responsible to the management. However, external auditors are mainly responsible to be answerable to the shareholders.



Furthermore, given the overall requirements of hiring an external auditor for limited companies, it becomes imperative that internal auditors are given the leverage to present their findings in any format. However, this does not hold true for external auditors. As a matter of fact, external auditors are supposed to strictly follow a set format to ensure that they are able to strictly adhere to the required format, as prescribed by the relevant accounting body. They have to be extremely specific pertaining to following their specific reports about audit opinions and management letters.



Internal audit reports are mainly used for the management, since it is an internal metric to gauge the overall efficacy of the processes being conducted at the organization. However, on the other hand, it can be seen that external audits are mainly used by a couple of external stakeholders of the organization. They mainly include investors, creditors, and lenders.


Over the course of time, it can also be inferred that internal auditors are asked for advice pertaining to issues that are faced by employees. 


However, external auditors have no such compulsion, and in order to protect overall authenticity, and preventing conflict of interest, external auditors are discouraged from having a close consultancy relationship with a given client. Another difference between internal and external auditors can be gauged from the overall scope of work that they provide. As a matter of fact, internal auditors are mainly responsible for examining issues pertaining to company business practices and risks. Their work has a main internal element associated with it.



However,  external auditors are more concerned about examining the overall financial records, and issuing opinions regarding financial statements of the company.



Internal auditing can also be considered as a perpetual process, which takes place across the year. However, that does not hold true for external auditors, where a proper audit is conducted once a year. Additionally, it must also be taken into account that auditors are also supposed to provide review services as many as three time per year.



Therefore, from the differences that have been set out, it can be seen that both internal and external audits differ greatly when it comes to the overall scope of work that they are ideally supposed to carry out. It is imperative that both these divisions are equally important to ensure that the organization is well-managed, and there are no threats of financial losses, or otherwise, in this regard.


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