- Internal audits
Internal audits are performed by internal employees of a company or organization. The audits are not distributed outside the company. Instead, they are prepared for the use of management and other internal stakeholders. Internal audits are used to improve decision-making within a company by providing managers with actionable items to improve internal controls. They also ensure compliance with laws and regulations and maintains timely, fair, and accurate financial reporting. Management teams can also utilize internal audits to identify flaws or inefficiencies within the company before allowing financial statements to be reviewed by external auditors.
- External audits
Performed by external organizations and parties, external audits provide an unbiased opinion that internal auditors might not be able to give. External financial audits are utilized to determine whether there are any material misstatements or errors in a company’s financial statements. When an auditor provides an unqualified opinion or clean opinion, it reflects that the auditor provides confidence that the financial statements are represented with both accuracy and completeness. External audits are important for allowing various stakeholders to confidently make decisions surrounding the company being audited. The key difference between an external auditor and an internal auditor is that an external auditor is independent. It means that they represent a more honest opinion rather than an internal auditor who may be biased. B.K.B & Associates is a well-established accounting firm that typically completes external audits for various corporations.
- Government audits
Government audits are performed by entities that relate to ensuring that financial statements have been prepared accurately in order not to misrepresent the amount of taxable income of a company. Within Kenya, the Kenya Revenue Authority (KRA) performs audits that verify the accuracy of a taxpayer’s tax returns and transactions. Audit selections are made to ensure that companies are not misrepresenting their taxable income. Misstating taxable income, whether intentional or not, is considered tax fraud. The KRA and uses statistical formulas and machine learning to find taxpayers that are at high risk of committing tax fraud. Performing a government audit may result in a conclusion that there is: • No change in the tax return • A change that is accepted by the taxpayer • A change that is not accepted by the taxpayer If a taxpayer ends up not accepting a change, the issue will go through a legal process of mediation or appeal.