The fundamental difference between Internal and External Auditing

May 03, 2011 Letters

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Dear Editor,
It was good to see once again the write-up of the two-day internal auditing workshop on “Audit Report Writing” and “Interviewing Techniques” in the newspapers. The remarks on the importance of internal auditing in the governance landscape, mentioned by the Minister of Finance, Dr. Ashni Singh, in opening the workshops, was also well articulated.
Such mention helps lift the profile of the profession and the Guyana Chapter of the Institute of Internal Auditors (IIA-Guyana). But I would like to add the following:
I established the IIA-Guyana on January 24, 2000 using my own resources at the Park Hotel in Main Street, after which an Executive and Board were appointed with Mr. John Seeram appointed as President.
Four months later, I arranged for John and Dudley Kirton (Vice President back then) to travel to the Institute of Internal Auditors Leadership Conference (held annually in April) in Orlando to receive the Charter which formally established the IIA-Guyana.
After then, I wrote a range of articles published in the local newspapers and various overseas journals promoting the Chapter. An editorial in the November 13, 2003 issue of the Chronicle on the profession itself was encouraging. It is hoped that this trend will continue so as to educate Guyanese professionals on the importance of the profession.
Ever since, the Chapter held seminars, workshops, and provided information on the profession to senior staff in organisations to help them understand the nature and purpose of internal auditing, it’s underpinning as a key corporate governance pillar, and how it differs from external auditing. I developed and conducted several of these workshops over time.
The fundamental difference between Internal Auditing  and External Auditing is that the internal auditor looks at operations that drive the financial numbers before those numbers are actually booked after which the external auditor takes over to ensure compliance with accounting standards for an opinion to be given on the financial statements.
But internal auditing is even more all encompassing as noted in the new definition as follows:
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
The Institute of Internal Auditors has determined that the four cornerstones of effective corporate governance in an organisation are the audit committee, executive management, the internal auditors, and the external auditors.
When all four cornerstones work in harmony with healthy interdependence, internal controls are strong, reporting is accurate, ethics are maintained, oversight is effective, risks are mitigated, and investments are protected.
There are advantages to be gained through IIA membership including access to the International Professional Practices Framework (the authoritative internal auditing literature), professional guidance, research reports, and a worldwide network of practitioners.
Also, group membership is available for large audit shops. In addition, the IIA’s flagship Certified Internal Auditor programme, including the Certified Government Auditing Professional (CGAP), designed specifically for public sector auditors, should be vigorously pursued by those who really want to be deemed internal audit professionals.
Over the years, I have been donating internal auditing, business, and other books in addition to computers to several institutions including the Amerindian Research Unit, Audit Office, UG Library and National Llibrary.
Any time I have reason to be in Guyana, I never missed an opportunity to do a seminar, workshop, do an interview, or write an article for the local newspaper on the profession.
Last year, I was recognised by the Canadian Institute of Internal Auditors when I was awarded the 2010 Arthur J. Child’s Distinguished Service in Canada Award for outstanding and exceptional service to the profession of internal auditing.
In my acceptance speech to the large gathering of internal auditing professionals from North America, I said:
I shall pass through this world but once. Any good that I can do; any act of kindness I can render; anyone I can inspire; and any activity I can undertake that adds value to life, let me do it now. Let me not defer or neglect it. For I may not pass this way y again.
I hope existing and prospective members of the IIA-Guyana are inspired by these words to do something to lift the IIA-Guyana profile and promote the profession by taking part in Institute’s activities.
Lal Balkaran, MBA, FCGA, FCMA, CIA

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