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Independent Auditing & Internal Auditing: What Should Businesses Choose?

Auditing is a crucial part of the financial strategy for any business. However, when it comes to auditing, there are two main types that businesses can choose from: independent auditing and internal auditing. Each type of audit has different roles, scopes, and objectives, suited to the specific needs and nature of the business. In this article, we will explore the differences between independent auditing and internal auditing, and provide suggestions to help businesses choose the appropriate auditing option.


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What is Independent Auditing?


Independent auditing is the process of examining, evaluating, and verifying the accuracy of a business's financial statements by an external auditing organization, with no connection or influence from the company being audited. Independent auditors are professionals or organizations with certifications who operate independently and have no financial or beneficial relationships with the company. The main purpose of independent auditing is to ensure the transparency and integrity of the financial statements, allowing investors, shareholders, regulatory authorities, and stakeholders to trust the business's financial information.


Main Tasks in Independent Auditing

  • Examine accounting records: The auditor will review and evaluate all of the business’s accounting records to verify the accuracy of financial transactions.

  • Confirm the accuracy of financial statements: The financial statements will be thoroughly checked to ensure they reflect the true financial position of the business.

  • Ensure compliance with accounting standards: The auditor will verify that the business has adhered to either international accounting standards or local accounting standards when preparing the financial statements.


Independent auditing is typically required by publicly listed companies or large organizations, especially when financial transparency is needed for shareholders or regulatory bodies.


What is Internal Auditing?


Internal auditing is the process of examining and evaluating a business's processes, systems, and operations from within, conducted by an in-house audit department or hired internal audit professionals. The main goal of internal auditing is to assess operational efficiency, compliance with internal regulations, and risk management. Internal auditing not only helps businesses detect errors or fraud but also provides recommendations for improving workflows and optimizing business operations.


Main Tasks in Internal Auditing

  • Evaluate internal control systems: Internal auditors will review the company’s policies and procedures to ensure that risk control measures and internal regulations are effectively implemented.

  • Examine risk management: Internal auditing helps businesses identify potential risks in their operations and proposes solutions to mitigate those risks.

  • Assess operational efficiency: Internal auditors evaluate the performance of departments within the business and suggest improvements to processes and cost optimization.


Internal auditing is especially important for large businesses with complex operations. Internal auditing helps ensure that business activities are conducted according to procedures, minimize risks, and detect errors in the system in a timely manner.


The Difference Between Independent Auditing and Internal Auditing


1. Objectives

  • Independent Auditing: The main objective is to ensure the accuracy of financial statements, helping external parties such as investors, shareholders, and regulatory authorities trust the business's financial information.

  • Internal Auditing: The main objective is to improve operational efficiency, control risks, and ensure compliance with internal regulations within the business.


2. Scope of Audit

  • Independent Auditing: The auditor focuses solely on evaluating the accuracy of financial statements, financial items, and accounting standards.

  • Internal Auditing: The scope of internal auditing is broader, covering the review of management processes, internal controls, risk detection and management, and operational optimization.


3. Independence

  • Independent Auditing: The auditor is an external party, completely independent of the business, and has no financial relationship with the company.

  • Internal Auditing: The auditor is an employee of the company or hired by the company, and therefore is not fully independent in decision-making and activities.


4. Audit Frequency

  • Independent Auditing: Independent auditing is usually performed once a year, typically at the end of the financial year.

  • Internal Auditing: Internal auditing can occur more frequently, depending on the needs and management strategy of the business.


5. Audit Targets

  • Independent Auditing: Performed to serve external parties such as shareholders, investors, and regulatory authorities.

  • Internal Auditing: Conducted to serve internal objectives, aiming to improve business operations and support management.

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Should Businesses Choose Independent Auditing or Internal Auditing?


The choice between independent auditing and internal auditing depends on the type of business, its scale of operations, and specific financial needs. Below are some suggestions to help businesses make an informed decision:


1. Large and High-Impact Businesses

Large businesses or publicly listed companies, where financial information must be disclosed and transparent, should opt for independent auditing. Having an independent auditor verify the accuracy of the financial statements helps strengthen the trust of investors and shareholders.


2. Businesses Needing to Control Internal Risks

For medium and large businesses, internal auditing is extremely important. These businesses need to review internal processes and risk control systems to ensure operational efficiency and minimize potential risks.


3. Small and Medium Enterprises (SMEs)

Small and medium-sized enterprises, with less complex operations, may choose internal auditing if their budget is limited. Internal auditing helps these businesses optimize workflows, control costs, and detect potential issues in business operations.


4. Businesses Needing to Review Compliance with Legal Regulations

If a business operates in an industry that requires compliance with tax or legal regulations, independent auditing will help the company meet these requirements most effectively. Having an independent audit will help the company demonstrate compliance and responsibility to regulatory authorities.


Financial Statement Audit Services of RSM Vietnam


The financial statement audit service is one of the core services of RSM Vietnam. With a team of independent auditors with extensive professional experience, RSM Vietnam confidently supports businesses in collecting and evaluating evidence to verify and report on the accuracy, fairness, and reasonableness of financial statements according to applicable standards and legal regulations.


RSM Vietnam is a member of the audit and consulting firm RSM Global, a group with expertise in audit, tax, and consulting services, ranked 6th globally. At RSM, we take pride in having a team of highly trained professionals both domestically and internationally, with extensive experience in their fields, ensuring the provision of trusted, detailed, and high-quality audit services to clients.


Contents of RSM Vietnam's Financial Statement Audit Services

  • Review and verification of the company’s accounting records and books.

  • Review and verification of financial statements.

  • Sending confirmation letters for bank accounts, investments, receivables, and payables.

  • Observation of the company's major fixed assets and verification of their reflection in the balance sheet as of the financial year-end.

  • Evaluation of the accuracy of the company’s internal control system in managing cash, inventory, and fixed assets to confirm the existence, ownership, and value of cash, fixed assets, and inventory as of the year-end.

  • Evaluation of the company’s internal control system concerning finance lease contracts.

  • Issuance of audit reports.

  • Issuance of management letters (if necessary) addressing limitations in the accounting system and internal control system, and offering suggestions from the auditors for improving these systems.


Other Services of RSM Vietnam

In addition to Financial Statement Audit services, we also offer other assurance services tailored to the specific reporting needs of our clients, including:

  • Review services based on agreed-upon procedures.

  • SOX, JSOX compliance reviews.

  • NGO project audits.

  • Forensic audits.

  • Inventory and fixed asset verification.


Please contact us to inquire about our professional audit services:

Hotline: 0988 139 090

Address: 25th Floor, Tower A, Discovery Complex Building, 302 Cau Giay Road, Dich Vong, Cau Giay, Hanoi.

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