How do external audits differ from internal audits?

Prepare for the Certified Government Auditing Professional Test. Utilize flashcards and multiple choice questions with explanations and hints for thorough exam readiness.

External audits are characterized by their independence as they are conducted by auditors who are not affiliated with the organization being audited. This independence is crucial because it enhances objectivity and ensures that the audit findings are credible. External auditors verify the accuracy of financial statements and assess compliance with applicable laws and regulations, providing assurance to stakeholders like investors, creditors, and regulators.

In contrast, internal audits are performed by employees of the organization and may focus on a broader range of activities beyond financial statements, including operational efficiency and risk management. Internal audits usually have more frequent occurrences to continuously monitor various aspects of the organization.

Additional options present varying perspectives that don't accurately highlight the fundamental differences: internal audits are not regulated by an external body, and while external audits do primarily focus on financial statements, this is not a definitive aspect since external auditors may also examine compliance and operational aspects to an extent. Thus, the distinction of independence is what fundamentally sets external audits apart.

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