Audits are conducted to companies or organizations to examine or asses the accounts of each company or organization to ensure that they are doing things properly and according to set standards as well as to find proof whether the statements they have declared are true or not. The things being examined in an audit are books, statutory records, vouchers, documents and books.
After the entire audit process, the results and the data gathered in the audit being conducted are documented and presented in an audit report. In this article, we will be learning about external audit report, why they are important and the other basic information related to it. Sample audit reports and templates for external audit have also been included to serve as your reference. Feel free to view and download them.
Example Auditor’s Report
Editable External Audit Report Format
Sample Audit Report Outline
Quality Assurance External Audit Report
Sample Independent External Auditor’s Report
External Safety Audit Report
Financial External Audit Report
What Is an External Audit Report?
External audit reports are documents that are produced by auditors after an audit is conducted. It records the results or the outcome of the audit as well as the list of activities done during the audit, criteria and set standards where the audit assessment was based. The contents of the external audit report varies depending on which aspect or department of an institution is being audited.
There are typically basically three paragraphs in an audit report that covers the topics about the scope of the audit, the responsibilities of the auditor and management, and the audit opinion of the auditor based on the information gathered from the conducted assessment. Audit reports play an important role in the business industry as it is a document that is used by investors and other businesses as a basis for finding a suitable company to invest on or a company with a good reputation to choose as a business partner. Having good or bad results or outcomes in an audit report matters and will greatly affect a company or institution.
What Is the Difference Between an External Audit and Internal Audit?
There are mainly two types of audit reports being used today and they are the external audit report and an internal audit report. Both types of audit reports include essential information that are sought after by many investors and businesses. They have a lot of similarities, which includes the areas in a business or company where they are conducted, the data gathered during the audit and the audit results or audit opinions. So how do we differentiate one from the other? The most effective way to do so is to determine their differences.
- When an internal audit is conducted, one of the employees from the company conduct the audit. An external audit on the other had is conducted by an outsider auditor or a third party auditor.
- Internal auditors are not just some random employee selected to do the audit, but they are real auditors who are hired by the company to be one of its employees to take care of the auditing side of things. External auditors who are hired from a specific firm are selected or voted by the votes of the company shareholders.
- Because an internal auditor is hired by the company, they report their findings to the company’s management while external auditors report to the shareholders as they are appointed or hired by them.
- it is not necessarily a must for internal auditors to be CPAs. The activities of external auditors on the other hand are directed by a CPA.
- the findings in an internal control is used to make improvements and internal editors also provide advice to the company about the best thing to do about the results of the internal audit. External auditors are not allowed to provide any advice or support to any clients or customers related to the results or outcome of the external audit.
- An internal audit report is used within the company while an external audit report is used by investors, stakeholders and other businesses as a form of reference to ensure the reputation and compliance of a company.
- Internal audit results are presented using any type of report format while an external audit report must follow specific format for the presentation of the audit result.
- When it comes to how often internal and external audits are done, there is a really big difference between the two. Internal audits are conducted regularly throughout the year while an external audit is only conducted once a year.
It’s particularly easy to differentiate an internal audit from an external audit. Perhaps, the defining difference that sets them apart and the easiest to remember is that internal audits are conducted by an employee of the company and an external audit is conducted by an outsider auditor. If you need to learn more about other types of audit, then you may want to check out articles, like Information Technology Audit Report Samples & Templates and Safety Audit Report Templates.
Importance of an External Audit
If an internal audit can be conducted by a company throughout the year, then why do you think there is still a need for an external audit to be conducted at least once a year? An external audit is important and for some good reasons.
- External auditors are hired by companies or organizations to conduct a thorough assessment even if they already have an internal auditor to do that for them. This is because external editors ensure that a company or organization is compliant to certain business rules and regulations. They are able to detect small problems within the company and provide you details about their findings without fear or any biases for doing so.
- They are third party individuals or firms who are not related to your company or business. Therefore, there is a guarantee that you will get an honest and reliable audit report from them.
- How can you tell customers, investors and other entities that your business is credible? The answer is hire an external editor to conduct an external audit. Because they are not related to your company, their opinions and evaluations will seem less biased. Having an external audit conducted will help you build a good reputation in business.
- There are things that cannot be detected by people from within, but can definitely be determined by people from outside. An external auditor will be able to freely criticize the internal processes of a company or organization as well as point out the things where they are doing wrong.
- An external audit is also a way to double check the examination or assessments done during an internal audit, especially in cases where the results are unclear, doubtful and unacceptable.
What Things Are Included in an Audit Report?
The following is a list of things that are included in an audit report.
- The title of the audit report
- The addressee or to whom the report is sent to
- Introduction to the audit report
- Identification of the audited financial statements
- A statement containing the responsibilities of the management of the company
- A statement containing the responsibilities of the auditor
- The scope of the audit written in paragraph, which includes a description of the nature of the audit
- References for the relevant national standards followed in the audit
- A list of the work or activities that the auditor has done, including a description of them
- The auditor’s opinion regarding the financial statements that they have audited
- The date of the audit report
- The name and address of the auditor
- The signature of the auditor
Report of the External Auditor
External Audit Terms of Reference Template
Sample Audit Report Template
Audit Report Template
Editable Audit Report Template
External Audit Report on Special Purpose Financial Information
What Happens When Fraud Is Detected?
An audit is an examination or assessment of the financial side of things. It is likely that they will be able to detect fraud somewhere if it actually exists. Finding out secrets that are not meant to be known, such as fraud, may endanger the life of the auditor but they don’t actually runaway from the scene and hide someplace safe. What they do if they detect fraud is they immediately have it reported to the attention of the management so that they can plan an appropriate action for it. What if the management does not take the appropriate actions that they are expected to do? The external auditor will then need to consider withdrawing from their engagement with the management if this happens.
We hope that you are able to learn about external audit and external audit reports in this article. If you wish to learn more about other related articles, you can always visit our website. Examples of the articles we offer are Sample Product Analysis Reports and Sample Inspection Reports.
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