Introduction
Many Nigerian business owners hear the words internal audit and external audit and assume they mean the same thing. In reality, they serve different purposes and understanding the difference is critical for compliance, risk management, and business growth.
This guide explains internal audit vs external audit, their key differences, and how Nigerian businesses can benefit from both.
What Is an Internal Audit?
An internal audit is an independent, objective review of an organization’s internal controls, operations, and risk management processes. It is usually conducted periodically throughout the year and focuses on improving how the business operates.
Internal audits are designed to help management:
Identify operational weaknesses
Strengthen internal controls
Reduce fraud and inefficiencies
Improve compliance with policies and procedures
Internal audit reports are typically prepared for management and the board, not for public filing.
What Is an External Audit?
An external audit, also known as a statutory audit, is an independent examination of a company’s financial statements carried out by an external audit firm.
In Nigeria, external audits are required by law under the Companies and Allied Matters Act (CAMA) for many organizations.
The primary purpose of an external audit is to:
Verify the accuracy of financial statements
Ensure compliance with accounting standards and laws
Provide an independent audit opinion for stakeholders
External audit reports are often submitted to:
Shareholders
Regulators (CAC, FIRS, SEC, etc.)
Banks, investors, and other third parties
Key Differences Between Internal Audit and External Audit
Purpose
Internal audit focuses on improving operations and controls.
External audit focuses on verifying financial statements for compliance and accuracy.
Frequency
Internal audits are conducted regularly or continuously.
External audits are typically conducted once a year.
Reporting Line
Internal audit reports to management or the board.
External audit reports to shareholders and regulators.
Legal Requirement
Internal audit is usually not legally mandatory for all businesses.
External audit is legally required for many organizations in Nigeria.
Scope
Internal audit covers processes, controls, risk, and operations.
External audit focuses primarily on financial statements and disclosures.
Do Nigerian Businesses Need Both?
Yes, in many cases.
Internal Audit Helps You Prepare
A strong internal audit function:
Reduces audit findings
Improves record-keeping
Strengthens internal controls
Minimizes fraud risks
External Audit Confirms Compliance
An external audit:
Provides independent assurance
Builds trust with stakeholders
Meets statutory and regulatory requirements
Organizations with effective internal audits usually experience smoother external audits and fewer compliance issues.
Which Businesses Benefit Most from Internal Audits?
Internal audits are particularly valuable for:
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Growing SMEs
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Public sector institutions
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Financial services companies
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Organizations with complex operations
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Businesses handling large transaction volumes
Even when not legally required, internal audits provide strong operational and governance benefits.
Common Misconceptions About Audits
Audits Are Only for Big Companies
Many SMEs benefit significantly from internal audits and are legally required to have external audits.
Audits Only Find Faults
Well-conducted audits identify risks and opportunities for improvement.
External Auditors Do Internal Audit Work
External auditors are independent and cannot replace internal audit functions.
How Novara Professional Services Supports Both
At Novara Professional Services, we provide:
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Independent external (statutory) audit services
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Structured internal audit and control reviews
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Risk-based audit approaches
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Partner-led audit engagements
Our goal is not just compliance, but helping organizations strengthen governance, reduce risk, and operate more efficiently.
Final Thoughts
Internal audit and external audit serve different but complementary roles. Understanding the difference helps Nigerian businesses make better decisions, stay compliant, and protect long-term value.
Whether you need statutory audit services, internal audit support, or both, working with experienced professionals makes all the difference.
Speak with Novara Professional Services today for trusted audit and assurance solutions.
