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PART C: ACCOUNTING AND REPORTING SYSTEMS, CONTROLS AND COMPLIANCE 
 
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4
External audit 
Internal auditors
are 
employees
of the organisation whose work is designed to 
add value
and who 
report to the 
audit committee. External auditors
are from 
accountancy firms
and their role is to 
report 
on the financial statements to shareholders
.
Both 
internal and external auditors
review controls, and 
external auditors
may 
place reliance
on 
internal auditors' work
providing they assess its worth. 
External audit 
is a periodic examination of the books of account and records of an entity carried out by 
an independent third party (the auditor) to ensure that they have been properly maintained, are accurate 
and comply with established concepts, principles, accounting standards and legal requirements and give 
a true and fair view of the financial state of the entity. 
It cannot be overemphasised that the 
primary purpose 
of an external audit is to review the books and 
records in order to give a 
professional opinion
on whether the financial statements represent a 
true and 
fair view
of the organisation. 
4.1 Differences between internal and external audit 
The following table highlights the differences between internal and external audit. 
 
Internal audit 
External audit 
Reason
Internal audit is an activity designed to 
add value
and improve an 
organisation's 
operations
. 
External audit is an exercise to enable 
auditors to