Frequently Asked Questions
Frequently Asked Questions
What is the difference between Internal Audit and External Audit?
Internal audit is a mechanism by which the management of an organisation satisfies itself that the internal control system for which is responsible is working effectively. Internal audit units are responsible for reviewing and testing internal control systems on behalf of management and reporting any weaknesses and failings to them. It is then for management correct such weaknesses. While internal audit should report directly to top management of the organisation concerned and thus be independent of other parts of the organisation they remain a part of the institution. In contrast external audit is wholly independent of the organisation and usually reports externally on its work. For example in the private sector external audit reports to the shareholders and in the public sector the external auditor will report to elected representatives – to local councillors etc at the local government level and to Parliament at national level. It is quite normal for external audit to review and rely upon the quality of internal audit work where this is carried out to necessary standards.
What do you mean by the term financial audit?
Financial audit refers to the review by professionally qualified teams of individuals of the financial statements of an organisation resulting in an opinion on those statements as to whether they present a true and fair view of the financial activities of the organisation for the year in question. In the public sector this may refer to organisations ranging from large organisations such as Ministries to smaller entities such as small hospitals, schools and museums. In all cases the work to be carried out by the audit team should be in accordance with accepted international standards if the final opinion is to be valid. The fundamental purpose of financial audit is to provide independent assurance, information and advice on the proper accounting for and use of resources.
What do you mean by the term performance or VFM audit?
These two terms are interchangeable and mean the same thing. Performance audit is an in depth examination of a specific activity of an organisation to assess whether the organisation concerned is operating economically, efficiently and effectively in carrying out its functions. For example, on a small scale whether a school is purchasing the right kind of IT equipment for its needs at the best price or on a larger scale whether the Ministry of Transport's highway maintenance programme is managed to ensure roads are maintained with minimum disruption to road users at least cost.
