Who are internal auditors responsible to compared to external auditors?

Internal auditors primarily serve the organization’s management, providing insights and evaluations concerning risk management, governance, and internal controls. They engage in ongoing assessments and assist management in enhancing operational efficiency and compliance, thus directly reporting to and functioning under the direction of management. Their primary goal is to help improve the organization's processes and to provide assurance that the operations align with established policies and regulations.

In contrast, external auditors are responsible to the shareholders or the entity's owners and provide an objective assessment of the financial statements to ensure they are free of material misstatement. Their role is to serve as an independent check on the company's financial reporting to protect the interests of external stakeholders.

Understanding this distinction is crucial in recognizing the different roles and responsibilities of internal and external auditors within the governance framework of an organization.