The Institute of Internal Auditors (2005) defines internal auditing as "…an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes."

One way to distinguish between internal auditors and their more familiar counterparts, external auditors, is the intended audience of their reports. External auditors are hired by a company to audit that firm's financial statements and issue an opinion on the reliability of those financial statements. While external auditors are in a contractual relationship to the firm whose financial statements are being audited, external auditors owe their primary fiduciary responsibility to groups outside of the firm, such as investors and creditors. The external auditor's report or opinion is provided to groups outside of the firm that...