A Career in Auditing

Abstract

Auditing has become a mainstream profession in the wake of the Sarbanes-Oxley Act of 2002.  Now more than ever, companies and investors alike are paying close attention to the reporting standards utilized and sometimes disregarded in accounting.  Although almost everyone gathers an idea of what auditing can accomplish, but not everyone fully understands the dichotomy that both Internal and External auditing bring to the table.

A Career in Auditing

Before digging deeper into the realms of internal & external auditing, it is important to first understand that auditing as a whole takes on a massive degree of responsibility.  Companies worldwide have benefited from sound auditing standards & practices.  Conversely, any size company from small start-up to a goliath like Enron can also feel the devastating blow that improper and illegal auditing may bring.  It is of the utmost importance that everyone in the business world understand the key role that auditing plays in everyday life.  With this being said, we can begin to further examine both sections of internal & external auditing.

The Internal Atmosphere

Although appearing vague at first glance, the roles of internal & external auditors are quite different.  Internal auditors are actual employees of the company for which they perform their duties.  The internal auditor, as indicated in the name, deals primarily with internal controls.  As managers are key players in developing successful strategies for improvement, internal auditors must assure that the strategies implemented are both effective and efficient.  There is a heavy degree of risk assessment with regards to internal controls.  It is the internal auditor’s interest to assure the programs carried out are not only in the best interest of the company, but also lawful and compliant with industry standards.

The role of the internal auditor is as important as any member of management.  Without this vital member, corporations could easily see external audits go horribly awry as internal controls lose a strong method of checks & balances.  The risk management provided by the internal auditor can stem to past, present & future.  This individual can help diagnose past issues & help management with steps to safe-proof any repeat events.  Current situations can be resolved in a timely manner before pointed out during a larger external audit.  Finally, internal auditors can assist management with predictions and estimates for the future, to insure effectiveness & legality of all steps to be taken.

The External Atmosphere

When discussing the role of the external auditor as being separate from internal auditing, there are two glaring differences to address.

One: It is important to understand that a firm/individual chosen for an external audit is completely independent from the subject of the audit.  There are to be no links (financially, professionally, etc) between the two parties as to insure a completely unbiased approach to the work.  When an auditor bears interest one way or another in a company it audits, the information, performance, and overall judgment can and will be impaired.  It is not to say that the auditor should form a harsh bias against its client, but keep a neutral stance during the work.

Two: The external auditor – unlike the internal auditor – expresses an opinion on the financial statements & additional research done through a company.  The internal auditor’s role may stretch into risk aversion, but it does not generate a formal opinion on the client’s operations.  The external auditor examines different aspects of operations for any signs of foul play.  This may come in the form of vouchers, receivables, inventory, and of course the financial statements presented by the company.  This is not to say that the external auditor actively pursues acts of fraud, as their main goal is to guarantee that the information presented by a company is a fair and valid representation of their current state.

Overlap of Internal & External

Although both internal & external auditors have their own set of duties to oversee, there is indeed an overlap in the line of work.  Communication is quite common between the two factions.  Internal & external auditors may regularly meet to share data findings, consult on risk assessment, share planning information, and so on.  The external auditors understand that those working internally usually have a stronger background with the given industry, and thus can utilize the information given to enhance the quality of their findings.  On the contrary, internal auditors can use the external help to better evaluate the risk at hand throughout the industry, as external auditors would have knowledge of multiple clients for which to work from. Having cooperation between both sides can increase the odds that false information doesn’t fall through the cracks.

Career Opportunities

Although we are faced with one of the worst economic climates in recent history, the field of auditing still employs a healthy number of positions throughout the profession.  Positions can range anywhere from entry-level, to becoming a partner in your own firm, to being a controlling member of the AICPA.  With the necessary training & experience, one can find themselves entering a career in either the external or internal areas of auditing.

Internal Positions

Internal auditing can land someone in a position directly dealing with risk aversion & compliance.  There are numerous distinct titles that can be achieved with this overlaying career path, as much of the internal auditor’s work, as previously discussed, deals with this element.  The actual job duties can range from basic data analysis to actually implementing new & effective methods of risk aversion.  Entry-level auditors may find themselves planning a schedule of & conducting the internal audit, while keeping up to date with current standards to insure their actions are indeed lawful.  Higher up, a senior internal auditor will most likely deal with assigning staff responsibilities to other members, generating the scope & focus of the audit, as well as providing extensive recommendations for upper management.  Management may also employ a Chief Audit Executive (CAE) to oversee new initiatives directly dealing with risk & the possible change of company procedures.  Although the range of responsibility between job titles may be large, each individual part plays its role in assuring that management’s goals are met, and that organizational flow runs smoothly.  It becomes advantageous to an internal auditor to take on roles in varying positions, as to gain a well-rounded knowledge of the field and further their career.

External Positions

Much like that of internal auditing, the career opportunities for external auditors are many.  However, unlike its counterpart, the external auditing profession is mainly centralized to private firms conducting business with corporations as well as the government.  The external auditor, like we have discussed, must stay independent of its client’s, therefore not being employed by the corporation itself.  This idea of independence cannot be stressed enough with regards to the job entitlement of the auditor.

External auditors may find themselves becoming involved in either a compilation, review or a full audit of a company.  With different options available for different situations, this leaves a number of different career paths to follow.  A professional could see themselves beginning with a compilation project of a local company with small financial statements.  With such a position, one can expect to be responsible for compiling the financial statements of a client in a clear & concise manner.  As with reviews & compilations, no opinion is given, thus limiting the amount of veteran expertise needed for such a task.  Alternatively, the range of work could expand to a full-out audit of a Fortune-500 company.  If reaching a senior audit position, the external auditor will be responsible for preparing a detailed plan of action for the audit which is to be followed through precisely.  The senior positions also require that the auditor pay close detail to internal controls, industry standards, and other elements of business to insure that no material misstatements are in existence.  As with internal auditing, the depth of a certain job has a direct correlation to the amount of responsibility issued to an individual in their career path.

Conclusion

As we face a time in our lives where the job market seems to be shrinking by the day, we bear witness to jobs being terminated based on general necessity.  This is not to say that the business field has not seen cutbacks in positions held, it is merely to admit the fact that there is always need for internal & external auditing professionals.  There are regulatory standards that must be upheld by skilled individuals, and this is a fact that continues to hold true today.  What I hope to have shown in this manuscript is the diversity of career opportunities available for both internal & external auditors, as well as their independent/shared values and responsibilities.  It is crucial that everyone may understand the importance of these individuals, as auditing helps keep the corporate world in check, and running smoothly from year to year.