Financial auditing is both a necessity and a legal obligation for any commercial enterprise. It acts like a monetary review that highlights a company’s business processes and internal systems, which is often a requirement for larger organisations. Auditing can be done internally by the company or the company might also choose to take help from other professional auditing companies.
Internal auditors are essentially a team from within the organization that conduct a financial audit on the finances of the company and then reports the advances to the directors. These internally conducted audits help the company in developing better risk management schemes for the company. It is also the responsibility of the auditing committee to ensure to check the effectiveness of the current risk management policies of the company. The work of such auditors seems like a more continuous process and based more on the internal operations of the company.
On the other hand, the external auditors do not belong to the organization they are auditing. External audits, unlike internal financial audits are conducted by an independent body of auditors that reports directly to the shareholders of the company. The external audits conduct a thorough check of the financial management of the company in question. The appointment of external auditors is generally carried out by the shareholders of the company. In most of the cases the shareholders have a discussion with the directors of the company prior to the appointment of the auditors. However, it must be realized that the clients in the external audit are the companies themselves and not the stakeholders. Thus, in the case of external audits, pleasing the clients becomes all the more difficult for the auditors.
As far as the responsibility of a financial audit is concerned, the scope varies a lot depending on whether the audit is external or internal. In case of external audits the financial auditing committee can be responsible to a range of different people, including the clients of the company, the shareholders, the directors or even the government. Unlike this, the results of internal audits do not go beyond the company where the audit is conducted. The auditing company reports only to the senior management of the company. These are generally not so much concerned with the financial review as identifying the key risks to the business in the given scenario.
CA Management Consulting specialises in financial audits and can guide you through the process and make sure that your company is compliant. We specialise in audit, accountancy, tax, legal and advisory services across a range of markets and sectors.