What can internal and external audits help identify?

Internal and external audits play a crucial role in identifying a range of risks, particularly in operational and compliance areas.

Operational risks encompass inefficiencies and mishaps within processes that may lead to negative outcomes, such as financial loss or reputational damage. Similarly, compliance risks are those that arise from failing to adhere to laws, regulations, and internal policies, potentially leading to legal penalties or damage to credibility.

By conducting thorough reviews and assessments, audits evaluate the effectiveness and efficiency of an organization's operations and processes, while also ensuring compliance with relevant regulatory frameworks. This means they are well-equipped to both pinpoint areas of operational ineffectiveness and ensure that the organization is meeting all necessary compliance obligations.

Hence, the knowledge gained from audits addresses both operational and compliance risks, which makes the answer that encompasses both aspects the most comprehensive choice.