Q4RQ - Horngren'S Financial And Managerial Accounting

Question

Question: What is the difference between an internal auditor and an external auditor?

Step-by-Step Solution

Answer

Answer

The main difference between the internal and external auditor is that the internal auditor is a regular team member of the organization and the external auditor is not.

Step 1: Definition of the external auditor

An outside accountant, utterly independent of the business, evaluates the controls to ensure that the financial statements are presented relatively by GAAP. The company does not control the external auditor.

Step 2: Difference between the internal auditor and external auditor

An internal auditor is a team member of the company and works according to the company policies. On the other hand, the external auditor is an outside accountant who works independently of the business.

The internal auditor examines whether or not the company is following the legal requirements related to internal control. On the other hand, an external auditor examines whether financial statements are prepared by following the GAAP or not.