Internal Audit Vs. External Audit

An audit is an inspection to determine whether a company is compliant with a set of governing rules. An internal audit is conducted by a company on its own operations while an external audit is conducted by a regulatory agency or customer to determine whether the auditee is obeying set regulations or contracts.

Types

There are audits for finances, safety and a virtually endless list of other concerns, depending upon the types of regulations to which a company is subject.

Required Internal Audits

Many regulators require companies to have an internal audit system. The effectiveness of the internal audit system is an item of inspection by external auditors.

External Audit Penalties

If an external audit uncovers a problem that presents a threat to public safety, this can result in a product recall, the company can be placed under direct supervision of the regulatory agency or the company can be closed down. People can be fined or jailed for blatant disregard of the regulations.

Serious Internal Findings

Companies are required to report certain serious findings (such as batch of drugs less potent than advertised) from internal audits to the appropriate regulatory agency.

Internal Audit Benefits

Internal audits help ensure a company is obeying regulations and catch minor problems before they become major problems. A thorough, rigorous internal audit helps a company prepare for external audits.

References

• Reference for Business: Internal Auditing

Resources

• Comptroller of the Currency: Internal and External Audits Controllers Handbook
• U.S. Department of Health and Human ServicesFDA Guide to Inspection of Quality Systems