Difference of Internal and External Auditor

2. Compare the responsibilities of internal auditor and external auditor in relation to: I. The design and operations of systems and controls Internal auditor | External auditor | Internal auditing activity is primarily directed at improving internal control. Internal auditors perform audits to evaluate whether the systems and processes are designed and operated effectively as well as providing recommendations for improvement. | External auditors may be called upon to determine if an organization 's internal controls are adequate. This involves investigation into internal auditing practices. If, after evaluation, the internal controls are found to be lacking, the external auditor can report the problems to the company, which can make any changes necessary to ensure more accurate accounting. Hence, external auditor regards the internal control system only from the materiality perspective, which permits them to eliminate those errors that are not significant. |

II. The responsibilities in detecting fraud and errors in an organization Internal auditor | External auditor | An internal auditor is responsible to detect frauds and errors from all activities in the organization. The internal auditors will use an internal controls system to detect fraud and any errors that may have been committed, so that, the auditors will be able to make the ultimate judgment on whether everything is recorded correctly. In conclusion, the external auditors are concerned on overall frauds and errors occurred in the organization as a whole. | Current auditing standards require that external auditors provide reasonable assurance that the financial statements are free from material misstatement. It is the responsibility of the external auditors to report fraud and error that he sees or suspects. External auditors need to bring suspicions to management. If management is hesitant to take the proper action, the auditor has the right to stop working for the company, and may