Careers in Internal Auditing

Internal Audit is a process of company’s self evaluation and assessment of the operations and
management of the company. Internal audits are conducted by almost each and every business entity
(irrespective of its size) in order to ensure that corporate governance, risk management and accounting
processes are efficiently operational.

Internal audits also play a crucial role in maintaining the accuracy and integrity of the financial
statements of the company and helps in their timely preparation. It is an intra-company inspection that
guarantees compliance, promotes accountability and helps in preventing frauds.

Internal Auditor

Internal auditor (IA) is a team of highly professionals’ people employed by the management of the
company in order to identify problems at every level and department of the company including
operations, finance, and management. They are also responsible to correct the irregularities and provide
necessary guidelines and measures to improve the overall structure of the company.

Internal Auditor v/s External Auditor

An internal auditor should not be confused as an external auditor .

 The main difference lies in their appointment procedure. The internal auditor is hired/ employed
by the management of the company while the external auditor is a third party accountant
appointed by shareholders vote in the AGM.
 An internal auditor has to identify the discrepancies in the company and educate the
management about the same and provides necessary guidelines for improvement while external
auditor’s major duty is to assure that company’s financial statements and other records are free
from material miss-statements whether due to fraud or error.
Types of Internal Audits and Responsibilities of an Internal Auditor

 Operational Audit: internal auditor has to review the operational activities followed by the
company. They are required to scrutinize the financial statements prepared periodically by the
management in order to find any material discrepancy and its nature of cause i.e. whether due
to error or fraud.

Double check the reports of expenditure, supervise the work schedules of the employees, verify
the assets physically including inventory and fixed assets valuation. Consult the management
and staff members, interview them and prepare detailed notes.

 Compliance Audit: the internal auditor needs to review that organization is in compliance as per
GAAP or IFRS, Securities Exchange Commission (SEC), Securities Exchange Act and other state
and federal regulatory agencies.

It needs to correct any compliance discrepancy before the external audit takes place and have to
explain the reason behind non compliance.

 Management Audits: the internal auditor needs to review the performance of the management
and the working culture of the whole organization in order to check the policies and procedures
adopted by the management and what are the goals of the organization. It questions whether
the managerial structure is working as per the goals set by the company and educates the
management if there are any spaces for improvements.

 Forensic Audits: These are specialized audits that examine the financial data of the company for
various legal purposes. Forensic audits are generally conducted by regulatory agencies in order
to uncover different types of frauds including theft, corruption, bribery, extortion,
embezzlement, etc.

Forensic audits can also be conducted in cases of family disputes, bankruptcy and business
insolvency.

 Social Audits: internal auditors are required to understand the social and ethical performance of
the company. Since company is taking something from the society in the form of profits (or
money), hence it becomes its ethical and moral duty to return something back. And internal
auditor reviews the social responsibility of corporations and educate the management if there
are lacking somewhere.

 Internal Controls: The internal auditor needs to assess the internal control system of the
organization and determine whether it is capable of handling all the possibilities of risks than
can put the organization under threat. Also provide measures for improvement wherever
required. It can also report if it detects any possibility of fraud within the company.
  Risk Management Audits: internal auditor is required to identify and evaluate all the existing
and possible risks that include operational risk, market risk, credit risks, financial risks and other
internal risks related to health and safety, security against physical and cyber theft.

An internal auditor can take the help of various field experts while performing its auditing
procedures. E.g. to evaluate cyber security, auditor can consult an IT expert or an ethical hacker.
Similarly to make valuations of physical assets specially properties, a designated valuing
professional needs to be employed.

 Reporting: After analyzing every aspect about the company, a formal report needs to be
prepared that contains all the material and confidential information and findings to be
presented to the top management of the company. It also includes procedures and techniques
of audit and recommending measures for possible improvements.

Educational Qualifications:

 Internal auditor at entry level at least requires a Bachelors’ Degree with specialization in finance,
accounting, management, taxation or administration
 For senior positions a Masters’ Degree will be an additional advantage but a substantial
experience in the field of auditing will be an essential requirement.
 For the advanced or leadership positions a candidate can posses some additional certifications
including Certified Internal Auditor (CIA) awarded by Institute of Internal Auditors or a Chartered
Public Accountant (CPA) awarded by American Institute of Certified Public Accountants
 Some other important certifications includes Certified Information System Auditor (CISA),
Certified Government Auditing Professional (CGAP)  and Certified Fraud Examiner (CFE)

Essential Skills:

 Honesty, integrity and moral principals are the important set of skills for an auditor because the
employer relies on the auditor for legal, managerial and operational functionality of the
organization.
 An internal auditor must incorporate higher educational knowledge. Apart from sound technical
knowledge, an auditor must possess decision making and common sense abilities.
 Patience and passion towards numbers is a necessary skill because auditor needs to deal with
tones of figures, values and amounts in order to find everything that is suspicious.
 An auditor must know how to read between the lines because the information seems fine at the
outer layer but there are hidden discrepancies. One needs to pick cherries from the stash.
 An auditor needs to take verbal interviews of the working staff and educate the employer or
management about its findings and the procedures and techniques it adopted for auditing.
Hence he/ she should have excellent communication skills both verbal and written.
Hiring Companies

However apart from a few specific organizations, internal audit is not a legal obligation but due to
increased strictness from regulatory agencies, internal auditors and their services have become
substantial important for the companies. The result is that internal auditors gets frequently hired by
both private and public companies, governmental agencies and not for profit organizations (NPOs) to
audit every aspect of the organization before an external audit takes place because unlike internal audit
reports, the stakeholder to external audits includes investors and regulatory agencies.

Expected Salary

As per Investopedia, the average national salary for an entry level internal auditor with experience from
zero to five years is around $56304 for the year 2018. Internal auditor can receive an annual bonus of
$8000 and $5135 under profit sharing programs.

However salaries can highly deviate based on educational qualifications and experience level and even
location.

At senior level the average salary is $97802 per annum and at advanced level the average salary can
reach to $125047 per annum.

Job statistics and prospects

The job of internal auditing might not be high profile but it has become a crucial post for almost every
business entity as it not only ensures the fitness of the financial health and smooth functioning of the
businesses but also checks the legal and regulatory compliances of the organization.

The job of internal auditor needs higher level of educational qualifications and equivalent amount of
experience in the field of auditing. As a result there is a great shortage of auditing professionals.

Hence internal auditors are in great demand among organizations that makes internal audit an attractive
career option.
Positives

Internal audit has recently emerged as the most important controlling activity under a company that
keeps ongoing during the entire financial year. After achieving higher educational qualifications and
experience, the career can create tremendous opportunities.

People who are passionate about numbers and mathematics will have at most job satisfaction in the
auditing field as they need to deal with tones of numbers.

Unlike the boring work of accounting, auditing is a job with lots of excitement where he plays the role of
a detective and detects suspicious events and even prevents frauds and other possible damages to the
company.

Negatives

Internal auditing is a continuous and stressful job where the auditor needs to spend hours scanning the
figures to detect something suspicious. Auditor needs to show great attention to every single detail and
analyze the information them carefully and with at-most precision. The job carries huge responsibilities
and requires lots of hard work.

Bottom Line

With the emergence of global market, convergence of accounting principles, and strict legal obligations
levied by regulatory agencies, the process of internal auditing has become a very important activity for a
company. Internal audit not only keeps the organization compliance ready but also educates the
management about various discrepancies during the entire financial year that can be resolved early than
later.

Internal auditors needs to serve the company with at-most integrity and employ higher due diligence
while performing its auditing procedures and techniques.