Final answer:
The primary differences between internal auditing and external financial auditing by a CPA include their objectives, where internal auditing aims to improve operations and a CPA expresses an opinion on financial statements.
Step-by-step explanation:
The primary differences between an internal auditing function (IAF) and external financial reporting assurance services, commonly provided by a Certified Public Accountant (CPA), are related to their objectives, independence, scope of work, and reporting structure.
The IAF is primarily focused on improving an organization's internal control structure, risk management, and governance processes. It aims to add value and improve the organization's operations.
On the other hand, a CPA performing external financial reporting assurance services is primarily concerned with expressing an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework.
Internal auditors are employed by the organization they audit, although they should maintain objectivity in performing their duties. External auditors, such as CPAs, are independent of the organization and are engaged to provide an unbiased opinion on the financial statements.
The scope of an IAF is determined by management or the board of directors and can cover a wide range of areas beyond financial reporting, such as operational effectiveness and compliance with laws and regulations.
A CPA's scope is limited to the audit of financial statements and providing reasonable assurance that the statements are free of material misstatement.
Internal auditors report to management and the board, typically through the audit committee. External auditors report their findings directly to the shareholders and creditors, usually through the audited financial statements and the auditor's report.