What distinguishes an external audit from an internal audit?

An external audit is characterized by the involvement of an outside entity that assesses a company's financial statements, operations, or compliance with regulatory standards. This independent third-party assessment lends credibility to the audit by providing an unbiased perspective, which is essential for stakeholders such as investors, regulators, and customers.

The external auditor is tasked with evaluating whether the company's reports give a true and fair view of its financial position and whether its operations comply with relevant laws and regulations. This independent review is crucial for maintaining trust in the financial reporting process, thereby distinguishing external audits from internal audits, which are conducted by employees of the same organization and primarily focus on internal controls and operational efficiencies.