Effectiveness of Internal Auditing in Comparison to External Auditing

1
Title: Effectiveness of Internal Auditing in Comparison to External Auditing

2
Contents
Research Rationale..........................................................................................................................3
Research Objectives.........................................................................................................................3
Research Questions or Problems.....................................................................................................4
Literature Review............................................................................................................................4
Research Method.............................................................................................................................8
Conclusion & Recommendation....................................................................................................11
References......................................................................................................................................12

3
Research Rationale
The present research is undertaken to examine the importance of auditing within an
organization. The activity of auditing within an organization can be regarded as the process of
independently checking the financial records of an organization so as to assure that the financial
statements prepared are accurate. The overall process of auditing is carried out by an auditor who
holds the responsibility of developing and examining the financial records. An auditor provides
opinions about the accuracy and faithful presentation of financial information that forms the
basis for decision-making of its end-users. This research holds high importance for providing an
understanding of the process of auditing that is crucial for assessing the adequacy of the control
mechanism of a firm. There are mainly two types of audit carried by an organization, that is,
internal and external audit. This research is conducted to demonstrate the importance of internal
and external auditing within a firm by providing an insight into both types of auditing
(Abdolmohammadi, 2009).
The research will help in making a comparison between the internal and external auditing
to determine which more effective for promoting the growth and development of a firm. The
difference between the internal audit, that is, reviewing the internal operational processes of a
firm and the external audit, that is, conducted by a third party to check the financial report
accuracy will be illustrated adequately with the help of research process. The research topic
selected of examining the effectiveness of internal and external auditing is selected in the context
to illustrate the nature of their processes and their relative importance for a firm. This will help
the readers in identifying and comparing effectively between the processes of internal and
external auditing.
This will help the business companies to implement the internal or external auditing
procedures for attaining the organizational goals and objectives. The research issue is selected
for exploration as there is large importance of reviewing the internal as well as external control
mechanism of a firm with the help of auditing process. The increasing fraudulent activities
within the firms is causing the need for reviewing and examining its internal as well as external
control structure to protect the interest of general public. The business companies worldwide
largely places focuses on carrying out external auditing of their firms and ignores the relative

4
significance of internal auditing as well. The internal auditing is required by the management of
a firm to assure that it has adequately implemented the risk and governance mechanisms for
maximizing the operational efficiency (Alzeban, 2015).
Research Objectives
The present research will aim to attain the following objectives:
 To develop an understanding of the importance of auditing process for the development
and growth of the businesses
 To examine and analyze the difference between internal and external auditing process
 To gain an understanding into the effectiveness of the internal auditing over external
auditing
Research Questions or Problems
In the context of the above stated objectives, this research will mainly aim to achieve the
following research question “Does internal auditing is effective over the external auditing
processes carried out by businesses at a global level?” This research will also attain the answer
for the following sub-research questions in context of this main research question as follows:
 What is the significance of auditing process carried out by firms for achieving their stated
goals and objectives?
 How the process of internal auditing within a firm does is different from that of external
auditing?
Literature Review
Savcuk (2007) stated that the process of auditing can be regarded as independently
reviewing and examining the records and activities of an organization for assessing the
appropriateness of system controls. This is done to ensure that businesses are complying
effectively with the established policies and procedures that are essential for their sustained
growth and development. In this context, Karagiorgos (2009) also explained that the auditing
process is mainly undertaken by a firm for ensuring that all business processes are carried out in
a transparent and ethical manner. The business firms are required to continually review their