| Nature of difference |
Internal Audit |
External Audit |
| 1. Object |
The main object of internal audit is to fulfill the needs of management. |
The object of external audit is that after audit a true and fair view of the state of affair is presented to the shareholders. |
| 2. Period |
The audit work continues throughout the financial year as required by the management. |
External audit usually conducted at the end of the financial year. |
| 3. Verification of assets and liabilities |
Under internal audit verification is not done because trial balance is not prepared during the year. |
Under the external audit verification of assets and liabilities is done because trail balance is prepared at the close of year. |
| 4. Qualification |
In case of internal audit the auditor need not to possess professional qualification. |
In case of external audit the auditor must be a chartered accountant. |
| 5. Legal requirement |
Internal audit is not compulsory. It is conducted for the satisfaction of the management. |
In case of joint stock companies external audit is compulsory are required by company ordinance 1984. |
| 6. Scope of audit |
It is continuous review of record for the purpose to check the errors and frauds. |
It is detail and extensive checking of the books of accounts and financial statements. |
| 7. Application |
Internal audit is usually adopted by large and medium size business for the purpose of sound internal control. |
External audit is adopted to fulfill the need of company ordinance 1984. |
| 8. Trail balance |
In internal audit trail balance not prepared during the year. |
In case of external audit trail balance must be prepared and checked at the time of audit work. |
| 9. Status |
In case of internal audit the auditor is employee of the company. |
External audit is conducted by an independent and professional auditor. |
| 10. Appointment |
Internal auditor is appointed by the management of the company. |
The external auditor is appointed by the shareholders of the company. |
| 11. Responsibility |
The internal auditor is responsible to the management of company. |
The external auditor is responsible to the shareholders of the company. |
| 12. Removal |
The internal auditor can be removed at any time by the management. |
The external audit cannot be removed by the management. |
| 13. Report |
In case of internal audit there is no question of submitting the audit report. |
In case of external audit audited report is submitted at the end of audit work. |
