Internal Audit

An internal audit is distinct from the external audit in being more comprehensive, broader and covers all financial, administrative, regulatory and operational aspects.

An internal auditor:

  1. Inspects daily journal entries and help correct detected errors in accordance with internal regulations, applicable laws and accounting standards.
  2. Works on the application of accounting principles used in the facility.
  3. Ensures the presence of supporting documents for all recordings.
  4. Inspects of signatures required for all transactions.
  5. Properly archives of data and documents.
  6. Contributes to the generation of financial statements.
  7. Follows management direction and the task assigned to him by management.
  8. Signs the financial statements since they are generated under his supervision and responsibility.
  9. Does not express an opinion on the financial statements and results.
  10. Is an employee or contractor of the company.
  11. May be associated to a manager through family relationships, employment or other financial ties outside of the company.
  12. Is not necessarily a certified and registered auditor.

An external auditor may rely on the internal auditor reports, thus reducing his efforts. However, an internal audit is not a substitute to an external audit.

The most important differences between an internal and external auditor are:

Subject Internal Auditor External Auditor
Link to the facility A functional link / is part of the establishment Contractual link / independent of the establishment
Appointment Appointed by management and / or by the Audit Committee Appointed by the General Assembly
  May work for or have an affinity with one of the members of the Board of Directors or one of the officials or managers May not have an affinity up to the third level with a member of the Board of Directors
Work assignments Review of all financial and administrative operations Auditing of financial statements and review of processes on a sample basis
Financial statements Contributes to the production of financial statements Audits and express an opinion on the financial statements
Internal control system Contributes to the establishment of an internal control system Checks the extent of compliance with internal control system
Independence Complies with the instructions of management Works with complete independence from management and the Board of Directors
Subsequent events Does not research the events subsequent to the balance sheet date Researches the events subsequent to the balance sheet date
Expressing of opinion Does not express an opinion Has the duty of expressing an opinion
Signing Signs statements and reports issued by him Only signs the report issued by him
Reporting Directs periodic reports to management Directs his final report to the General Assembly