Popova V.A., Usachev V.A., Candidate of Philosophy, Associate Professor

Donetsk national university of economics and trade

named after Mikhailo Tugan-Baranovsky

AUDITOR – INTERNAL VS EXTERNAL

There are numerous different audit/accounting firms across the world where one could train as an external auditor, but refer to the websites of the BIG 4 firms below to find out more about what career paths they offer and what each entails. If you have any choice in where you do your training it HAS to be with one of the BIG 4 – the reputation and global reach of these firms will set you apart and open up doors that would not necessarily be available to others

Although the audit process of obtaining and evaluating evidence and communicating the results to interested users applies to all audit applications, the objectives of auditing vary depending on the needs of users of the audit report. Internal auditing, governmental auditing, and external auditing all serve different objectives.

Internal auditing is defined as an independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization. The objective of internal auditing is to assist members of the organization in the effective discharge of their responsibilities. To this end, internal auditing furnishes them with analyses, appraisals, recommendations, counsel, and information concerning the activities reviewed.

Internal auditors require a broader definition of auditing because they are employed by the company that they audit. Consequently, internal auditors must define their function in such a way that the function will include any activity that is helpful to their employer.

Governmental auditing covers a wide range of activities on the federal, state, and local levels and numerous regulatory agencies. Governmental auditors not only examine financial statements but also determine whether government program objectives are met and whether certain government agencies and private enterprises comply with applicable laws and regulations.

Some examples of the responsibilities of an internal auditor:

· Conduct risk assessment of assigned department or functional area in established/required timeline

· Establish risk-based audit programs

· Determine scope of review

· Review the suitability of internal control design

· Conduct audit testing of specified area and identify reportable issues and dimension of risk

· Determine compliance with policies and procedures

· Verbally communicate findings to senior management and audit committees and draft various management reports

· Liaise with external auditors on audit related matters.

External auditing involves reporting on financial statements prepared by management for external users of third parties. Third parties include stockholders, creditors, bankers, potential investors, and federal, state, and local regulatory agencies.

Difference between internal and external auditors

Internal auditors who are members of a professional organization would be subject to the same code of ethics and professional code of conduct as applicable to external auditors, however they differ primarily in the relationship to the entity they audit. Internal auditors, though generally independent of the activities they audit, are part of the organization they audit and report to management, whereas external auditors are totally independent to the organizations they audit, and are not allowed to have any relation to their clients via family, investments etc. Typically, internal auditors are employees of the entity, though in some cases the function may also be outsourced.

External Auditors are not employees of the audited agency. The external auditor performs, under contract, an annual audit of the financial records of the Municipality and the Federal and State single audits. Their emphasis is on the fairness of financial representations. The certified public accounting firm of Mikunda Cottrell is currently the external auditor for the Municipality of Anchorage. The Municipal Assembly, Municipal Clerk's Office, is the contract administrator for the external auditor.

Internal auditors who are members of a professional organization would be subject to the same code of ethics and professional code of conduct as applicable to external auditors, however they differ primarily in the relationship to the entity they audit. Internal auditors, though generally independent of the activities they audit, are part of the organization they audit and report to management. Typically, internal auditors are employees of the entity, though in some cases the function may be outsourced. The internal auditor's primary responsibility is appraising an entity's risk management strategy and practices, management (including IT) control frameworks and governance processes. Internal auditors sometimes look at the same data or perform some of the same steps as external auditors. This gives UCAR the opportunity to fix any problems before the external auditors review our practices.

Сonclusion, the main thing internal and external auditors have in common is the great emphasis they place on their independence. When people read a report from an auditor, whether internal or external, they should be confident that the document is factual and objective.

Working in the auditing sector is always challenging and whether you work as an external or internal auditor you will face plenty of career challenges. Many people opt to work in internal roles to have the camaraderie and rapport of working with a single company whilst others enjoy the variety of work they come across in an external role where every day is different.

References

1. Sotnikov LV The auditor's report: the procedure for compiling / / Audit records, 2009, N 3;

2. LG Makarova Requirements for the preparation and execution of audit reports and reports / / Audit records, 2010, N 5.