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One way to distinguish between internal and external auditor is the scope of works. Internal auditors can only do auditing jobs inside the companies that employ them; they are companies’ internal people. Their job is to perform both financial and operational audits to study the risks in both areas as well as what has been and needs to be done to minimize those risks in order to achieve certain objectives of their companies. Meanwhile, external auditors’ job is to perform auditing works for other companies that hire their services, which means they do a lot of traveling. It is their main responsibility to examine and give opinions about the presentation of companies’ financial statements and to ensure the correct implementation of accounting principles and regulations. For example, internal auditors might concern on production and selling cost efficiency to maintain profit, while external auditors only judge whether the company can continue their business by examining its financial statements, without giving any advice of how to improve their financial performance.
Other differences are compensation and career advancement. In the first two to three years, the salary of an internal auditor could be 2 – 3 million rupiahs higher compared to an external auditor. However, for the rest of their working period, external auditor will earn more than internal auditor will since external auditor will receive bonuses in addition to their salary (Jurnal Akuntansi Keuangan, 2012). Besides that, internal auditor can only advance their career to the level of Chief Audit Executive, which is below the CEO, because they reside in the company; meanwhile, external auditor can advance their career to become the owner of auditing firm, especially because they travel a lot resulting in their vast networks.
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Despite of those differences, there are certain similarities between internal auditor and external auditor.
Qualification is one obvious similarity between internal and external auditor. Both types of auditors must have bachelor degree in accounting or finance major, which means that to be an internal or external auditor, we must apply to the faculty of business in any university majoring in either finance or accounting. In addition, both positions are often required by companies to take professional certification exams, such as Certified Fraud Examiner (CFE) and Certified Public Accountant (CPA).
Final similarity is that both internal and external auditor must comply with the accounting regulation, which is Pernyataan Standar Akuntansi Keuangan (PSAK), in performing their auditing works. In giving advice for a company to increase their financial performance, an internal auditor must pay attention to the rules of PSAK. Same obligation also applies to an external auditor, who must follow the guidance in PSAK to give opinion on companies’ financial statements.
In summary, internal and external auditors have several differences and similarities. Both positions differ in scope of works, compensation and career advancement yet they are similar in the qualification requirements and the obligation to obey certain accounting regulations. After knowing the comparison between internal and external auditors, we can conclude that internal auditor is a suitable position for people who enjoy improving the internal system of a company, while external auditor is more suitable for people who wish to gain experiences and to build networks through examining various companies.
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