CHINHOYI UNIVERSITY OF TECHNOLOGY

COURSE: AUDITING PRINCIPLES

PROGRAMME: BSCAC

NAME SURNAME REG.NUMBER

PETTINA TADYA C1111500Z

BRIDGETTE KATSANDE C1111951P

BLESSING MANJENGWA C1111497W

JAPHET MANJOVHA C1111225A

GERALD .E. NYAMATENDEDZA C1111366D

PRIMROSE MHINDU C1111367E

JOSWEL TACHIVA C1111552F

NGONIDZASHE BHASVI C1111365C

RUTENDO NYAMURERA C1111679T

TAWANDA MWEDZIUNASHE C1111448S

QUESTION (1)

CLEARLY OUTLINE THE DIFFERENCES AND SIMILARITIES BETWEEN INTERNAL AUDITORS AND EXTERNAL AUDITORS.

An internal auditor is an independent individual (employee) from within an organisation assigned by the management to analyse the company accounting records to ensure that the company is following and complying with all regulations.

An external auditor is an independent professional employed by an organisation to perform an audit according to specific rules and laws on the financial preparation of the financial statement and then give an opinion on whether they reflect the true position of the organisation

DIFFERENCE BETWEEN INTERNAL AND EXTERNAL AUDITORS.

Internal auditors External auditors i) They are internal contractors from within -They are external contractors, in simple the organisation, can be an employee terms he is just someone employed to audit assigned by the management to audit their their books from outside the organisation. books. ii) The auditor seeks to provide an opinion on -The auditor seeks to provide an opinion on the adequacy and effectiveness of the system, whether the accounts show a true and fair risk management, and the weaknesses of view of the business. internal control systems. iii) He is appointed by the management. -He is appointed by the shareholders/owners of the organisation. iv) After completing the audit assignment he -External auditors report back to the report back to the management. shareholders. v) His roles and duties are defined by the -His roles are defined by the statute (rules management. and regulation that must be followed which are according to the law. -If there is no statutory law or law of engagement then the auditing must be done according to the agreement. vi).Internal auditors are the tools of - External auditors focuses on the legality management who help in taking suitable and validity of the transactions to be administrative and policy decisions. provided to shareholders and outsiders vii) Professional qualifications are not -They must have professional qualifications necessary for internal auditors. as laid down in the companies act viii)They review the operation of the It is conducted on an annual basis or organisation continuously throughout the continuous basis depending on the nature of year the entity.

SIMILARITIES BETWEEN INTENAL AND EXTERNAL AUDITORS. i) Both auditors carry out test routine and this may involve examining and analysing many transactions ii) Are both worried if the procedures used are very poor and or there was basic ignorance of the importance of adherence to them. iii) Both are deeply involved in information system since this is a major element of managerial control and as well as being fundamental to financial reporting process. iv) Both seek active cooperation from the organisation or auditee. v) Both are intimately tied up with the organisation system of internal control. vi) Both are concerned with the occurrence and effect of errors and misstatements that affect the final accounts. vii)Both provide formal reports after completing their audit assignment.

QUESTION(2)

CLEALY OUTLINE DIFFERENCES AND SIMILARITIES BETWEEN INTERNAL AUDIT REPORT AND EXTERNAL AUDIT REPORT.

DIFFRENCES BETWEEN INTERNAL AND EXTERNAL AUDIT REPORT.

An internal audit report refers to a self examination conducted by the entity itself which reveals the risk management and operation of the internal control system and their weaknesses.

An external audit report written by an outsider comprising of an opinion basing on the preparation of the financial statement on whether they reflect the true position of the entity .This form of report is addressed to the shareholders or to another party such as a business or bank .

Internal audit report External audit report i) Internal audit report is more frequent, they -External audit report are prepared annually are prepared on a continuous basis. and at times continuously depending on the -They are more detailed. nature of the business. ii) They are designed to focus on the internal -They are meant to certify and control the control systems of the entity. performance of the top management. iii)Internal audit reports are done prior to -They are based on the examination of finalisation and certification of accounts by finalised accounts of the company approved top management by the board of directors. iv)It covers the aspect of management -External audit report are more focused on performance and effectiveness. adherence to laid down system and procedures. v)The internal audit report is addressed to the -The external audit report is addressed to the management. shareholders or owners of the entity. vi)This form of report includes all aspects -They are highly summarised, they do not observed, actions and recommendation contain actions or recommendation in grouping major and minor problems and the respects to internal control and other matters. a summary or overall evaluation. vii. They are produced because management -These are normally produced because of commission them for control and corporate legal requirements and are therefore heavily governance purposes. regulated.

SIMILARITIES BETWEEN INTERNAL AND EXTERNAL AUDIT REPORT.

i) Regardless of the type of audit, the starting point is always the objectives and goals of the organisation. ii) The next consideration is the “what is the risk associated with achieving the organisational objectives?” iii)The auditor( both internal and external) is going to plan the audit effort around the areas that pose the largest risk to the achievement of objectives. iv) There are various organisation objectives but one of them will always be reliable financial reporting including financial statements other objectives fall in the categories of strategic, operations and compliance, which we will in more detail below:

 The overall audit thought process for both types of auditors is similar.

 Once controls are identified and tested, auditors access if the existing controls are sufficient and effective to mitigate the risk.

 The risks that still exist in a controlled environment are known as residual risk. ‘v)Both of them are formal reports prepared by auditors after completing the audit assignment. vi)They all state what must be done and the basis of reference, (law and accounting standards in the case of external audit report), (The terms of reference in the case of internal report)and the overall findings.

REFFERENCE

Millichamp .A.H; (2008),Auditing ninth edition;RR Donnellel, China.

ARUNA JHA, SHRI RAM;(2008) Auditing problems and solutions college of commerce, Tax Mann Allied Services (p) Ltd.

Puttick, G et al;(1998), The principle and practise of auditing, Ed, Juta & Co Ltd Capetown. http:// answer.yahoo.com/q.