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ACCA Applied Knowledge · Business and Technology · Internal controls

Which of the following is a key difference between internal audit and external audit?

The scope of internal audit is decided by management or the board and may cover any area of the business, whereas external audit has a scope fixed by law and auditing standards, mainly an opinion on the financial statements. The other statements reverse the two roles.

  1. AInternal audit is a legal requirement for all companies, while external audit is optional
  2. BInternal audit reports to shareholders, while external audit reports to management
  3. CThe scope of internal audit is set by management or the board, while the scope of external audit is set by law and auditing standardsCorrect
  4. DInternal audit gives an opinion on the truth and fairness of the financial statements, while external audit reviews operational efficiency

Explanation

Internal audit scope is determined by management or those charged with governance and can cover operations, compliance and risk. External audit scope is defined by statute and auditing standards and focuses on the financial statements. The other options reverse the roles.

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