The internal auditor is employed within a specific company and is responsible for the execution of risk-based internal audits, as well as assisting with other audit matters and projects. The internal auditor is responsible for providing independent, objective assurance on the adequacy and effectiveness of a company’s systems of governance, risk management and internal control to the Board and executive management and, in doing so, helps enhance the controls culture within a company.
The internal auditor would focus on the areas of greatest risk as determined by the risk-based audit plan. The internal auditor would be an independent entity within an organization with full access to management and an independent reporting line directly to the audit committee and executive board.
Some examples of the responsibilities of an internal auditor:
- Conduct risk assessment of assigned department or functional area in established/required timeline
- Establish risk-based audit programs
- Determine scope of review
- Review the suitability of internal control design
- Conduct audit testing of specified area and identify reportable issues and dimension of risk
- Determine compliance with policies and procedures
- Verbally communicate findings to senior management and audit committees and draft various management reports
- Liaise with external auditors on audit related matters
An external auditor is an audit professional who performs an audit in accordance with specific laws or rules on the financial statements of a company, government entity, other legal entity or organization, and who is independent of the entity being audited. Users of these entities’ financial information, such as investors, government agencies, and the general public, rely on the external auditor to present an unbiased and independent audit report. The primary purpose of an audit is to review and verify the company’s financial statements to form an opinion about the company’s financial statements. They may give a qualified, unqualified, adverse opinion or even a disclaimer. Although a financial statement audit is the most common type of external audit, external auditors may also conduct special purpose audits, which might include; performing specific tests and procedures and reporting on the results, a less intensive review, and compilations. Auditors can comment on weaknesses in the accounting records, systems and controls that they review in the audit. They provide a statistical analysis on the clarity and effectiveness of the accounting policies put in place by the company. They also help management become aware of evidence that may affect future audits. They can give advice management through recommendations.
Audit is the bread and butter work of accounting. This work can involve significant travel and allows you to really understand how money is being made in the companies you are analyzing. As an external auditor you will get experience across a wide range of industries (e.g. Financial Services, Consumer Products, Media & entertainment, Oil & Gas, Automotive, Power & utilities, Government & Public Sector, Private Equity, Retail,Technology, Telecommunications, Mining etc)
Some examples of the responsibilities of an internal auditor:
- Prepare and/or review risk-based audit plan and detailed work programs for testing in operational, legal, governance and/or financial areas such as cash, accounts receivable, inventory, fixed assets, accounts payable, etc.
- Develop, perform, and supervise day-to-day execution of the risk-based audit plan
- Complete and maintain adequate working papers.
- Discuss with management the highlighted business risk concepts and material audit differences and determine with them an approach to address these risks and differences.
- Manage and train staff.
Any CA will have spent a minimum of 3 years in external audit as part of their training contract so therefore the above is already common knowledge to most. After your training contact you can choose to stay on in external audit and progress up the ranks to manager, director and then partner. You can also, within your audit firm move into other areas of the business, such as advisory/consulting (focusing on IT, performance improvement, risk management or transactional advisory services e.g. restructuring, corporate finance, mergers & acquisitions etc) or tax (a broad area including tax planning, transactional tax advisory, tax accounting, tax compliance, transfer pricing etc).
There are numerous different audit/accounting firms across the world where one could train as an external auditor, but refer to the websites of the BIG 4 firms below to find out more about what career paths they offer and what each entails. If you have any choice in where you do your training it HAS to be with one of the BIG 4 – the reputation and global reach of these firms will set you apart and open up doors that would not necessarily be available to others.
Difference between internal and external auditors
Internal auditors who are members of a professional organization would be subject to the same code of ethics and professional code of conduct as applicable to external auditors, however they differ primarily in the relationship to the entity they audit. Internal auditors, though generally independent of the activities they audit, are part of the organization they audit and report to management, whereas external auditors are totally independent to the organizations they audit, and are not allowed to have any relation to their clients via family, investments etc. Typically, internal auditors are employees of the entity, though in some cases the function may also be outsourced.
The main thing internal and external auditors have in common is the great emphasis they place on their independence. When people read a report from an auditor, whether internal or external, they should be confident that the document is factual and objective.
- Report Shows Internal Auditors Can Do More – Report on the Strategic Role of Internal Audit Released by Vonya Global (prweb.com)
- Does your internal audit function really provide assurance? (normanmarks.wordpress.com)
Are you planning on building a long-term career as an internal/external auditor. Is this your passion? Share your thoughts with us!