A CAREER AS AN AUDITOR
What is the difference between an internal and external auditor? Read on to find out.
An audit can be defined as an official examination of a company’s accounts and financial status. Generally, companies go through two types of auditing: internal auditing and external auditing. Internal audits are usually done by a company employee although in bigger companies, some internal audit functions are outsourced, whereas external audits are carried out by third party firms. Internal and external auditing differ in terms of responsibilities and objectives.
External auditors are tasked with analysing the financial documents of a company. When examining a company’s financial records, external auditors have to make enquiries if they find any inconsistencies to ensure their records comply with the Companies Act and auditing standards. After the analysis process, external auditors create detailed reports of their findings including necessary adjustments which are required by the client and give an opinion on the client’s financial statements.
On the other hand, an internal auditor’s role is to provide independent assurance on the organisation’s risk management, governance and internal control processes. An internal auditor also provides consultation to improve these processes. They also investigate fraudulent reporting and compare the company’s current performance to more established standards.
As auditing is one of the areas within accounting, the qualifications needed to be an auditor are similar to those of an accountant. Some companies prefer internal auditors to have qualifications that are related to the company’s nature of business as well as professional accounting qualifications. Those who aspire to be auditors can start out by studying a Bachelor’s Degree in Accounting. Upon graduation, they can enrol in professional accounting programmes by bodies such as the Association of Chartered Certified Accountants (ACCA), CPA Australia and the Institute of Chartered Accountants in England and Wales (ICAEW) among others. Most graduates work and study at the same time. Alternatively, students may also study the ACCA right after completing their pre-university courses.
The best auditors are people who are sharp, attentive and have brilliant analytical skills. Individuals who uphold the values of integrity, confidentiality and honesty also make great auditors. Good communication skills are needed as auditors need to liaise with their clients and colleagues often. In addition, external auditors need to have a firm understanding of accounting standards, tax laws and auditing methods. On the other hand, internal auditors need to be able to work in a team and build relationships effectively. Furthermore, internal auditors who have a deep understanding of their company’s business and culture will go far in their careers.
Internal auditors can be found in almost every company as they are appointed by the higher management internally or on a contractual basis. Employers of internal auditors include corporations of all sizes, financial institutions, non-profit organisations, and accounting firms. External auditors usually find employment in organisations such as chartered accounting firms and government agencies. They are then contracted by clients, ranging from small to big companies, to carry out their annual audit. Some of the leading accounting and auditing firms worldwide, also known as the Big Four, are PricewaterhouseCoopers (PwC), Deloitte, Ernst & Young (EY) and KPMG.
In a nutshell, internal auditors are responsible for assessing the risks faced by a company and how to manage those risks effectively. External auditors focus solely on a company’s financial status. Companies that go through regular audits are seen as more reputable by investors, financiers and the general public.