Internal Auditors are trained professionals employed by companies to provide independent evaluations of financial and operational business activities.
With higher levels of regulation across the globe (Sarbanes Oxley, ESG requirements, etc.), and with requirements of listed companies becoming tighter and tighter, especially around the area of risk management and control, the role of Internal Auditors has significantly increased in terms of visibility and importance across organisations.
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The word “independent” will be repeated quite a few times in this article: Internal Auditors are usually reporting to the Audit Committee, not to management. This independence assists them in providing an unbiased and objective view of financial statements and business processes.
Internal Auditor Role and Responsibilities
The role and responsibilities of Internal Auditors tends to be very similar from company to company, therefore making their skills transferable. Usually, it’s the breadth and the scope that vary. For example, it is very common for public companies to have a Head of Internal Audit, that reports to the Audit Committee, and a small team of Internal Auditors.
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Typical Internal Auditor responsibilities are:
- Assessing company’s financial risk.
- Safeguarding assets.
- Gathering and analysing data.
- Checking the accuracy of financial records and financial statements.
- Auditing the efficiency of business processes.
- Regulatory compliance.
- Stakeholder communication.
Normally, as it can be ascertained from the bullet points above, the role will focus most on risk assessments and internal controls and will require communication at all levels, including upper management and executive management. Also, as ERPs have evolved over the years and play an increasing role in every organisation, there is an expectation that an Internal Auditor will be versatile with information technology and will be expected to assess ERP as well. More on an Internal Auditor’s job description here.
Internal Auditor Qualifications & Skills
Internal Auditors contribute to the financial, operational, compliance, control, and governance functions of the business. It is a role that requires a deeper understanding of how business and operational processes work, and the ability to sift through large amounts of data in order to find patterns or loopholes.
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Internal Auditors are employed by companies in all sectors of the economy from banks to manufacturing companies, service sector companies, government departments and so on. In fact, the demand for Internal Auditors has been steadily increasing as the global economy and regulatory environment becomes more complex. Cyber security threats, internal fraud, and operational risks have also played their part in increasing the need for more Internal Auditors.
Having an internal audit function, will to an extent, ease external audits and will give External Auditors some comfort over the management of risk and controls.
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Internal Auditors are usually expected to have a bachelor’s degree in accounting or finance. Other degrees in fields such as business, economics or mathematics may also be considered. The idea is to have the necessary quantitative skills to look logically at accounting, financial reports and other data that comes your way.
Professional qualifications such as Certified Public Accountant, ACA, ACCA, or the equivalent may also be mandatory for certain roles. The Institute of Internal Auditors gives the ability to students to obtain a Certified Internal Auditor qualification.
There is no one qualification that fits all companies, as requirements vary from company to company. Having a more advanced certification however greatly increases the value of your CV and will also positively impact your overall compensation and career growth. For more CV tips see here.
Such professional certifications are by no means necessary for all internal audit rules, but some companies do insist on them.
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Internal Auditor jobs do require some amount of prior work experience. Most Internal Auditors spend a few years in accounting, financial planning, budgeting, or other finance roles. With a few years of experience under your belt, it becomes much easier to move into an internal audit role. Experience with accounting firms (especially the Big 4) is considered valuable and will further add weight to your CV.
It is also possible to transition into internal audit straight out of college if you’re willing to work at an entry-level role. Accounting or audit internships will help to bolster your chances of success at an interview. Many large companies offer internship opportunities to college students which also allows them to assess their suitability for a permanent job offer.
Such internship opportunities are the best way to get some on-the-job experience. Additionally, if you perform well, then that internship can also turn into a permanent offer straight out of college. Experienced internal auditors can raise through the ranks and occupy positions in finance or on audit committees.
What Skills Are Required to Be an Internal Auditor?
The most common capabilities that an internal auditors must have to be successful in any organisation are as follows:
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Risk Management Skills
The aim of Internal Auditors is to reduce the overall business and operational risks to which the company may be vulnerable. This requires a thorough understanding of risk management principles and their application in the real world.
In addition to identifying risks, Internal Auditors are also expected to come up with plans and implementation strategies to better control and monitor those risks in the future. This means that the role is not only about identifying problems but also remedying them.
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Internal Auditors can come across complex problems daily. For example, consider a situation where you need to figure out how to process a massive database of transactions for any errors or intentional manipulation. As another example, consider a situation where you detect an operational error and must devise a mechanism to prevent and control for it in the future.
Such problems require out-of-the-box critical thinking and the ability to tap into previous experience to solve them. A multidisciplinary approach is usually called for which combines operational, technological, risk management and business principles.
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Accounting experience is always preferred as the internal audit function has a lot in common with the role of Accountants. It is because of this reason that most Internal Auditors have an accounting background or even professional accounting certifications.
Normally, identifying accounting issues and providing recommendations would be one of the top priorities to satisfy senior management over the accuracy and integrity of financial statements, hence this is why there is a strong focus on an accounting background. This is not a mandatory requirement in all cases, but it is something that can add value to your CV as an Internal Auditor.
Project Management Skills
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Some internal audit tasks can be big enough to qualify as independent projects. Auditors must then put on their project management hats to effectively plan, execute and report on such audit missions and ensure appropriate time management as well.
Planning for audit projects starts with an understanding of the goals of the project, the resources available, the timelines, manpower needs, cross-department support, external consultants, etc. Once the requirements are in place, a plan must then be drawn up and goals, deliverables, and responsibilities stated. Then the actual execution begins where the Internal Audit team must communicate with all other business functions to get the relevant data and other information necessary for them to perform their audit mission. This is followed by data analysis and other checks and ends with and an audit report or a variety of written reports prepared for upper management.
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To successfully audit a business function or process, a deep and thorough understanding of the underlying product or service is necessary. Some products can be quite complex and Internal Auditors need to have the necessary product knowledge to effectively perform their duties.
For example, an Internal Auditor working at a financial institution may need to have experience with derivatives, fixed income products, credit risk and so on. Whilst an Internal Auditor working at a manufacturing company might need to understand how the head office works, the factories operate, the distribution centres operate, the sales offices handle their data, the service centres perform their roles, and what the tasks are that are assigned to third party vendors and so on.
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Internal Auditors look at regulatory reports and need to audit financial statements and the data that goes into them. This requires a thorough understanding of local laws related to their business as well as international accounting and reporting standards. In addition to all of this, companies also have their own internal guidelines, control mechanisms and governance rules that need to be followed. All of this necessitates a considerable amount of ongoing training sessions and continuous professional development.
Internal Auditors spend a lot of time gathering data and information from other teams and communicating the result of their audits with management and leadership. Both tasks require exceptional verbal, written and interpersonal communication skills.
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Effective communication is necessary to get the relevant data to and from the correct people and at the right time. Similarly, corporate leadership expects concise and to the point results which Internal Auditors must effectively communicate to them. As such, given the large amount of report writing, writing skills are essential for optimal communication.
Internal audit is a rather data-driven function which necessitates the use of advanced computational and data analytics techniques. This is why many companies now prefer candidates with data analytics and computational programming experience of some sort. For example, experience in SQL or other database management tools will be considered relevant to increase efficiency in performing an audit.
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Analytical skills are therefore a must for most Internal Auditor jobs.
Internal Auditors are expected to lead a team of professionals to achieve their goals. This requires team management, budgeting, task allocation, coordination, conflict management and all the other skills needed to effectively run a department. Internal Auditors have their own chain of command which can go all the way up to Chief Audit Officer or Chief Internal Auditor. Going higher up the chain of command means more responsibility, while also offering more opportunities for professional growth.
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Which Companies Hire Internal Auditors?
Robust internal audits are seen to correct issues quickly, maintain good reputations and beef up the reliability of a company’s risk management process as well as internal controls.
Generally, the more that risk assessments are performed, which is effectively what internal auditing is, the less likely it is that a company will find itself in reputational damage territory. As mentioned previously, more and more companies are hiring Internal Auditors, usually of medium and large size, and they are a must for public companies.
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How Does an Internal Auditor Role Help Progress in Finance?
An Internal Auditor role at the beginning of a career can help tremendously in terms of progression in finance. To begin with, an Internal Auditor would obtain a much wider company exposure than a normal Accountant would, by the very nature of its role. An Internal Auditor is expected to perform audits across a large spectrum of processes, not necessarily finance-related, although clearly financial statements will form part of it. The experience is invaluable in understanding the fundamentals of risk assessment and to develop a “risk management” mentality that usually an Accountant develops whilst in their first role as Financial Controller.
Internal Auditor skills are normally very well regarded in that of a Financial Controller role; report writing enables an Internal Auditor to hit the ground running when preparing corporate reports, whilst the significant experience in audit reports would also allow them to better manage External Auditors; and communication skills developed via liaison at all levels of a company will become critical in career progression.
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The list of skills provided earlier in this article shows that there’s more to the role than just “audit” and such a set of skills would be part of the armoury of a Financial Director or CFO.
The career path of an Internal Auditor can vary depending on the preference of the individual: the most common route would be to follow the “path” of Internal Auditor and become Head of Internal Audit and potentially Head of the Audit Committee. An Internal Auditor can also “switch” and become part of a team of External Auditors although such a path would require an ACA qualification, which is normally the preferred one by the Big 4.
An Internal Auditor role can also progress to that of Financial Controller or Finance Director; their familiarity with financial statements, business processes and information technology would give them a head start in such roles. Internal Auditor CV, Template & Examples here.
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The average salary of an Internal Auditor in UK is approximately 65k GBP, with the caveat that it depends on the size of the company as well as the scope of the role. As mentioned earlier, listed companies’ Internal Auditor roles are very common whereas in private companies it generally varies with the size of revenue. More on salary here.
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To find out more about a career in internal audit, please visit our resources page, or search for Internal Auditor roles here.
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