In today’s complex business environment, strong governance and accountability are essential to long-term organisational success. Internal and external audits are two of the most important tools that support this framework. While they may appear similar, each serves a distinct purpose and provides unique benefits.

The main differences lie in purpose, scope, and who conducts the audit. Internal audits are typically carried out by a company’s in-house team or outsourced specialists. Their primary objective is to evaluate and enhance the effectiveness of internal controls, risk management, and governance processes. Internal audits are performed continuously or periodically throughout the year, and the resulting reports are shared with management and the board, often through the audit committee, to inform decisions and improvements.

External audits, by contrast, are conducted by independent third-party auditors. Their focus is to provide an objective opinion on the accuracy and fairness of the company’s financial statements. Usually performed annually, external audit findings are reported not only to the board but also to shareholders, regulators, and other stakeholders, enhancing credibility and transparency.

Both audits are complementary. Internal audits identify inefficiencies, assess risks, and offer actionable insights that support strategic planning, while external audits provide assurance to investors and regulators that the financial statements are reliable. Internal audits also prepare a company for external scrutiny, helping ensure systems and controls function correctly and enabling external auditors to focus on key risk areas, making the process more efficient.

Together, internal and external audits form a robust governance framework, safeguarding organisations against financial, operational, and reputational risks. Leveraging both effectively is a hallmark of well-managed, resilient companies that prioritise transparency, accountability, and long-term success.
 

Article Written by Audit Team at RSM Malta