The Audit Objective of External and Internal Audit

The Audit Objective of External and Internal Audit


For an audit firm in Johor Bahru to carry out audits, the auditors must have some audit objectives to be achieved. Audit objectives change according to the audit scope as well as the types of audit engagements. An internal audit may possess different purpose from a statutory audit or external audit.

As an instance, the purpose of auditing the financial statements is to examine whether the bookkeeping were done properly or the financial statements that the clients of the auditor have prepared are true and fair or not.

The external auditors need to make sure that the supporting documents which they acquire are sufficient and appropriate enough to assist them in expressing their opinion. This is the primary purpose of carrying out a statutory audit.

However, the objective of internal audits may be different from external audits. Generally, the purpose of having an internal audit is to apply audit procedures (Also see Audit Procedures – Its Methods, Benefits and Restrictions) objectively and independently to add value to the company.

The Objective of External Audit

Contrary to what most people believe, it is not the job of the external auditor to detect fraud within an organisation. The primary purpose of having a financial audit or external audit is to enable auditors to perform audits on financial statements using financial accounting (Also see Distinguishing Financial Accounting and Management Accounting) objectively and independently, as well as allow them to form their opinion whether:

– The financial statements that the management has prepared are true and fair in all material respects.

– The management has prepared the financial statements in all material respects, in a way that comply with a financial reporting framework which is applicable.

To satisfy these objectives, it is a must for the external audits to adhere to the guidelines of the MIA and other related authorities strictly. Occasionally, an external auditor has to follow the rules of the local professional bodies that the government has established.

The Objective of Internal Audit

In some companies, there is a department for internal audits. And you may have a question in your mind: Why does such a department exist?

Generally, there are two main reasons for its existence. Firstly, for some organisations, it is demanded by regulation or law of the field that they are operating in. Secondly, it is part of the risk management of the organisation. It aims to reduce the risk of fraud by detecting internal control weakness across the organisation.

Sometimes, establishing a department for internal audit is to meet the criteria of the local legislation. For instance, a majority of the listed companies must establish an internal audit department to evaluate and examine the internal control for both financial reporting as well as operation (Also see What is a Test of Control).

The department for internal audit needs to be independent, and individuals who handle this department should possess certain qualifications. In some countries, if the companies want to recruit the chief of internal audit or the head of the department of internal audit, the companies must acquire the approval from a particular local body or authority. This is to make sure that the quality of this department has met the criteria.

In short, the primary purpose of having internal audits is to aid the organisation to evaluate and handle risks with its objectivity and independence by conducting highly systematic and independent work (Also see Audit Procedures That Helps in Detecting Fraud).


Thus, the objectives of the audit are various according to the audit scope and the types of the audit engagement. The purpose of auditing the financial statements is to allow the auditors to convey their opinion on those statements according to their professional assessment. Usually, the auditors will express four types of audit opinions.

The goal of having an internal audit is to act objectively and independently to add value to the firm by bringing the high discipline method to it.

To make sure that the internal audit can fulfil this purpose, the internal auditors have to ensure that they have introduced high discipline to the department. If the impairment of this exists, the audit committees are required to analyse the department of internal audit again.

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