An external auditor is required to be independent when performing LinkedIn

Many people have heard or used the saying that it’s always good to have a second set of eyes look at things. The same goes for auditing your company’s safety performance relating to:

• Company safety policies and procedures;
• Applicable safety legislation, Codes of Practice and Standards;
• The safety hazards and risks associated with your company’s operations;
• Achievement of company defined safety goals and objectives;
• Client imposed safety compliance requirements.

While companies generally rely on their own internal personnel to perform the internal safety audits, there are clear benefits in periodically using a suitably qualified external auditor to provide that second set of eyes and objectively asses the effectiveness of your safety management system. Below are some of the benefits of using an external auditor as part of your company’s safety management program.

Validation of Knowledge - External audit providers have the benefit of having conducted audits in multiple environments and are able to share best practices that can strengthen your company’s safety programs. Industry-wide knowledge held by external audit providers can serve to validate existing programs and provide recommendations for improvement or change when deemed necessary.

Audit Objectivity and Independence - External audit providers are able to provide a completely unbiased, independent and objective assessment and review of the effectiveness and implementation of a company’s systems and processes without the inherent familiarity and potential for personal bias that may occur over time with regular staff and day-to-day routines.

Accurate Results - Due to objective positioning, the results of an externally performed audit provide a more accurate review of what is occurring within the company environment in regards to implementation and application of defined safety practices and progress towards company safety goals and objectives.

Reduced Operational Business Impact - Audits conducted internally can be demanding on your employees’ time and resources. This may adversely impact on their inherent job function. Many internal auditors also have the perspective that performing internal audits is something that prevents them from doing their own job. This may impact on the effectiveness of the audits performed by internal personnel. However, an external auditor is able to enter a location for the sole purpose of conducting an audit and conduct the audit and interviews in a timely and efficient manner with minimal interruption to the operational efficiency of the company and its personnel. It is after all, the auditor’s sole purpose of being there.

Using an external party to conduct audits allows for a "Second Set of Eyes" and a different approach to research, review and analyse the effectiveness of company safety programs with minimal impact on the day to day operations of the business. A well prepared and well executed safety audit can make a substantial difference in the prevention of accidents and injuries. Thoroughly completed audits with proper follow up are also viewed favourably by regulatory authorities and certification bodies as well as strengthening your company’s overall safety management program.

Optimum SEQ Pty Ltd has the competencies and skills required to add value to your company's auditing programs and safety, quality and environmental management systems.

Audit is originated from a Latin word – Audire – which means to listen, and so the word auditor is someone who listens or reviews the statements (Jovanova & Josheski, 2012). In corporate world, the investors usually do not know the business terminologies or conditions in which they have invested. They have only limited knowledge of the financial statements and reports. Therefore, there comes a need of hiring a third person to look after the accounts, to have a check on accounts records occasionally, and give his opinion on the administration of the accounts. This third person is known as auditor.

There are two types of audit done for any company: Internal audit and External audit.

Internal audit

Internal audit is an independent consulting task done to add value to the company. It is not a compulsory part of the organization; however, it helps in improving the company’s objectives. It improves the company’s efficiency by performing effective risk management, and controlling the governance processes. ABP in its 1990 Internal Audit Guidelines define internal report as an independent body to review the internal system of any company. It thoroughly look through the internal control and proper use of resources (Davies & Aston, 2010). It is responsible to effective reporting of the situation to respective bodies and follow up with them. The management is responsible for giving the right amount of internal control to internal audit team. In addition, the company or organization hires the team for internal auditing. 

External audit

An auditing team that is not hired by the company or that does not have any affiliation with the organization performs external audit. This auditing team is responsible to check the financial statements of the organization externally, and to examine that the financial statements provided by the company itself matches with their results. In short, the external audit does an assessment, independently, of the condition of the company. The proper external audit gives a confidence of accurate financial reports and data, to perform better solvency. These external auditors are nominated by stakeholder, mostly from accounting and auditing companies. They are called when needed. These external auditors also have important role in maintaining the quality of the company and its products by giving their valuable feedback.

Difference between the role of external and internal auditor

Following are the key differences in the roles of the internal and external auditors:

1.   Internal audit is performed by auditing department of the company, while external audit is performed by an independent body, usually nominated by stakeholders.

2.   Internal audit is performed every now and then, while external audit is performed annually.

3.   Internal audit is not a compulsory thing but external is compulsory.

4.   Internal auditors report to the manager while external auditors reports to stakeholders or government.

5.   Internal auditors reviews the financial records of the company while external auditors ensures the accuracy of the records.

6.   Internal auditors are employees of the organization or company, while external auditors are not employees, or in any ways related to the company (Surbhi, 2015).

7.   Internal auditors are responsible for operational efficiency of the company, while external auditors are responsible for validation of financial statements.

Relations between external and internal auditors

Internal audit and external audit both compliments each other. It is a good practice that the external auditors get access to the reports of internal audit, and knows important facts and figures to draw good results. The external auditors usually communicate with internal auditing team to inform on any important matters that could affect the services (Jovanova & Josheski, 2012). A good communication system between external auditors and internal auditors can result in efficient exchange of information and effective control over the financial statements. Through this, both the internal and external auditors can plan timings of their work, minimizing the interference with the management.

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