Internal, external and statutory auditors: Know their differences.

Internal and external auditing and statutory auditing are aimed at evaluating compliance with the processes and regulations applicable to an entity. However, they differ, among other aspects, in their scope, functions and level of responsibility.

The main differences between internal, external and statutory audit are explained below.

Internal audit

Internal aud iting focuses on the administrative, operational and financial areas of an organization. Among its objectives is to corroborate that the activities are being carried out in a timely manner and following the policies, strategies and procedures defined by the entity, to subsequently issue a report on the matter.

The internal audit may be appointed by the legal representative or the management, which establish the limitations to be taken into account by the internal auditor.

The limitations are the areas in which the auditor is not allowed to act, which must be clearly stated in writing in the auditor’s functions.

A fundamental aspect of this type of audit is that it has a permanent presence in the organization, in order to control activities, always seeking to improve the areas for which it is responsible.

External audit

In the external audit, unlike the internal audit, the link is made through a contract for professional services.

The persons who appoint the external auditor are the legal representative, the administrator, the members of the board of directors, board of partners or shareholders’ meeting, depending on the type of organization. The scope of the external auditor, like the internal auditor, has marked limitations in the exercise of its work, since the presence is not exercised in perpetuity, but the visits are periodic.

The external auditor’s report is addressed to the users who hired him.

Statutory Auditor’s Office

The statutory auditor is an institution exercised by a professional accountant capable of attesting to the reasonableness of the financial statements, validating reports to government entities and monitoring the actions of managers.

The persons in charge of appointing the statutory auditor are the general shareholders’ meeting, the partners’ meeting or the associates’ meeting, depending on the type of entity in question.

The statutory auditor’s relationship with the company is generally through a labor services contract, due to an independent relationship, although it can also be done through an employment contract.

“Unlike auditors, statutory auditors have an unlimited scope of information”.

Unlike auditors, those charged with performing the duties of statutory auditors have an unlimited scope of information.

The professional guidance of June 21, 2008, which aims to provide conceptual and regulatory information on the practice of statutory auditors, states that:

“The institution of the statutory auditor in Colombia, is of capital importance in the economic entities of different nature, to it corresponds by the ministry of the law the control of auditing of these entities, to guarantee the correct performance and the transparency and suitability of the economic operations, its subjection to the legal norms, as well as the effectiveness and efficiency of the administrative management.”

Source: Actualícese