The public sector strives to manage public funds responsibly and deliver programs effectively. Both internal and external audits play key roles in supporting these efforts. While complementary, they serve distinct purposes.
External audit focuses primarily on providing an independent opinion on whether financial statements are fairly presented and in accordance with the applicable financial reporting framework. Its findings are typically made public. Internal audit, by contrast, has a broader mandate. It evaluates governance, controls, operations and emerging risks, providing recommendations to improve organizational performance and resilience. Internal audit advice and findings are primarily intended for management and those charged with governance, although they may also be made public. Together, internal and external audit enhance accountability and public confidence.
In the federal public sector, internal audit is governed by Treasury Board policy and guided by recognized professional standards. Internal audit activities are prioritized through risk-based planning, and the internal audit function is accountable to deputy heads through departmental audit committees, helping ensure the audit’s independence and objectivity. External audit is performed by the Office of the Auditor General of Canada, which conducts both financial and performance audits. The Auditor General’s reports are intended for a broad public audience and provide Parliament and Canadians with independent assurance on the government’s financial position and results and program performance.
Internal audit creates value by identifying risks early, strengthening organizational culture, improving operations and supporting informed decision-making. Its role extends beyond financial oversight to areas such as cybersecurity, information technology and human resources.
To be effective, internal audit must be independent, aligned with organizational priorities and adequately resourced. Although challenges such as threats to independence, limited capacity and resistance from auditees may arise, a strong internal audit function remains essential to sound governance, continuous improvement and the effective stewardship of public resources.
Read the full text of the HillStudy: Audit in the Federal Public Sector
By Lindsay McGlashan, Library of Parliament