What is the main distinction between external auditors and internal auditors?

The main distinction highlighted is that internal auditors are employees of the organization they audit, while external auditors operate independently and are usually contracted from outside the organization. Internal auditors are part of the organization's internal controls and risk management processes, ideally working more closely with management to improve the company’s operations and identify areas for efficiency. They are involved in evaluating the effectiveness of internal controls, compliance, and governance processes.

On the other hand, external auditors provide an independent opinion on the financial statements of the organization and are accountable to stakeholders, including shareholders and regulators. Their primary role is to provide assurance that the financial statements are free of material misstatement and give a true and fair view of the financial position of the entity.

Understanding this distinction is important for grasping the different objectives and approaches of internal and external auditors, as well as their roles in the overall governance structure of an organization. This clarity helps stakeholders understand who is responsible for what in terms of audit functions and what kind of insights they can expect from each type of audit.