Chapter 4 - External Auditing

Abstract

In direct contrast to internal audit practices and expected outcomes, external auditing is driven by a different type of motivation (compliance) with a different desired result (approval/pass/certification). This chapter describes external auditing in a structure similar to that in Chapter 3, providing information on external audit drivers and rationale, the benefits organizations expect from it, and challenges and drawbacks in undergoing external audits. The scope of this chapter includes common types of external audits and the purposes behind them, with a discussion of benefits and drawbacks to external auditing. It also discusses the organizations (audit firms) and individuals who conduct external audits, noting the experience, training, and independence requirements that constrain external auditing. With Chapter 3 on internal auditing, this material is intended to provide the reader with a good understanding of the nature and extent of external auditing as a necessary business function and clearly explains the value or positive results that can accrue from successful external audits as well as the penalties for failure.