Audits are more than just a compliance exercise; they are essential tools for strengthening accountability and transparency within organisations. Companies in the city-state often work with a local audit firm to ensure their financial records are accurate, risks are effectively managed, and regulatory requirements are met. Yet, businesses sometimes overlook the fact that there are two distinct forms of auditing—internal and external—each serving very different purposes. Understanding these differences allows companies to make informed decisions about the auditing services in Singapore they need at various stages of their growth.
Purpose of Internal vs External Audits
The primary distinction lies in their objectives. Internal audits focus on assessing a company’s internal processes, governance frameworks, and risk management systems. These audits are not mandated by law but are initiated by the organisation itself to improve operations and identify weaknesses before they escalate.
On the other hand, external audits are usually statutory requirements. These are performed by an independent audit firm with the primary purpose of verifying financial statements and assuring shareholders, regulators, and investors that the accounts are accurate and free from material misstatements.
Who Conducts the Audits
Internal audits are conducted by professionals within the organisation, often forming part of an internal audit department. Companies, in some cases, outsource this function to firms specialising in auditing services. The auditors report directly to senior management or the board to ensure independence from daily operational influence.
However, external audits must be performed by a licensed public accountant from an accredited audit firm in Singapore. Independence is legally enforced, as external auditors are not employees of the business being audited. Their objectivity adds weight to the assurance provided in their reports.
Scope and Focus Areas
The scope of internal audits is broad and flexible. Auditors may review financial controls, operational efficiency, IT security, compliance with policies, or even workplace safety, depending on business priorities. The findings are typically shared internally to guide strategic improvements.
In contrast, external audits have a narrower and highly standardised scope. Their core concern is financial accuracy, and they are conducted in line with the Singapore Standards on Auditing (SSA). While they may highlight weaknesses in internal controls, their findings are aimed at verifying financial statements for stakeholders outside the business.
Frequency of Audits
Another core difference lies in timing. Internal audits can be scheduled as frequently as the company deems necessary—monthly, quarterly, or annually—depending on the level of risk exposure and business complexity. They function as ongoing monitoring tools.
However, external audits are typically conducted annually in the city-state for companies that meet the statutory requirements under the Companies Act. The audit cycle is fixed and closely tied to the company’s financial reporting obligations.
Reporting and Audience
Internal audit reports are designed for internal stakeholders, including the management and the board of directors. They often contain detailed recommendations, corrective actions, and risk assessments. The emphasis is on practical solutions to strengthen business performance.
By contrast, external audit reports are directed at external stakeholders, including shareholders, regulators, lenders, and potential investors. They provide a professional opinion on whether the financial statements present a genuine and fair view of the company’s position. This distinction highlights why many businesses in the region rely on both internal and external audits for a holistic assurance framework.
Conclusion
Both internal and external audits are vital components of strong corporate governance. Internal audits help businesses identify and resolve issues proactively, while external audits provide independent verification to satisfy legal and regulatory obligations. Organisations can ensure that both forms of auditing services in Singapore are aligned with their strategic and compliance needs by engaging a reputable audit firm. Companies that invest in both internal and external audits position themselves to manage risks better, maintain investor confidence, and sustain long-term growth.
Contact Credo Assurance to discuss tailored audit support for your organisation.