Companies use internal auditors, trained professionals who check financial and operational business activities. Regulations like Sarbanes-Oxley and ESG requirements have increased worldwide. Listed companies now have stricter needs, especially for risk management. Because of this, internal auditors are more important and visible in organisations.
This article will use the word “independent” many times. Internal auditors report to the Audit Committee, not management. Their independence helps them give a fair and unbiased view of financial statements and business processes.
The operational and financial aspects of internal auditing are covered in this article. If you’re interested in learning more about the IT side, read the article on the qualifications and skills of IT auditors.
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Internal auditors help companies with finance, operations, compliance, control, and governance tasks. To succeed in this role, you need a strong grasp of how businesses operate and the skills to analyse data.
Many different types of companies, including banks and manufacturing companies, use internal auditors. These auditors also work in government departments. The need for internal auditors has grown due to the complicated global economy and regulations. The demand for extra auditors has gone up because of cybersecurity threats, fraud, and risks.
Having an internal audit function makes external audits easier and reassures external auditors. They feel more confident in managing risk and controls.
Which Academic Qualifications Are Required for an Internal Auditor?
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Internal auditors generally have a bachelor’s degree in accounting or finance. Other degrees in fields such as business, economics, or mathematics may also be possible. The idea is to have the necessary quantitative skills to look at accounting, financial reports, and other data that comes your way.
Some jobs require professional qualifications like CPA (Certified Public Accountant) from the Association of International Certified Professional Accountants, ACA (Associate Chartered Accountant) from the ICAEW (the Institute of Chartered Accountants in England and Wales), ACCA (the Association of Chartered Certified Accountants), or similar certifications. The IIA (Institute of Internal Auditors) helps students become Certified Internal Auditors.
No one qualification fits all companies, as requirements vary from company to company. Having a more advanced certification increases the value of your CV and will also impact your compensation and career growth. For more CV tips, check out this article.
Some companies need professional certifications for internal audits, but they are not necessary.
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Internal auditor jobs do require some 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, moving into an internal audit role becomes much more manageable. Experience with accounting firms (especially the Big 4) is valuable and will add weight to your CV.
Transitioning into internal audit straight out of college is also possible if you want to work in an entry-level role. Accounting or audit internships will help to bolster your chances of success at an interview. Big companies often give internships to college students to see if they’re a good fit for a full-time job.
Such internship opportunities are the best way to get some on-the-job experience. Additionally, if you perform well, that internship can also become a permanent offer straight out of college. Experienced internal auditors can rise 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 internal auditors must have to be successful in any organisation are as follows:
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- Risk Management Skills: Internal auditors strive to minimise the risks that could affect the company. This involves understanding risk management principles and applying them in practical situations. Internal auditors not only identify risks but also create plans to control and track them. They focus on finding and fixing problems.
- Problem-Solving Skills. Internal auditors can come across complex problems daily. Imagine a scenario where you have to find mistakes or manipulations in a large database of transactions. As another example, consider a problem where you detect an operational error and must devise a mechanism to prevent and control it in the future. Such problems need out-of-the-box critical thinking and the ability to tap into previous experience to solve them. Often, a multidisciplinary approach is needed. This approach combines different principles, like operations, technology, risk management, and business.
- Accounting Experience. Employers like accounting experience for the internal audit function, as it is like accountants’ roles. Most internal auditors have a background in accounting or accounting certifications. This is because of this. To make sure financial statements are correct, find accounting problems and suggest solutions. This is a top priority for complying with senior management. Hence, there is a strong focus on an accounting background. Although it is not mandatory in all cases, it can add value to your CV as an internal auditor.
- Project management skills. Some internal audit tasks can be big enough to qualify as independent projects. Auditors need to plan, execute, and report on audit missions, managing their time well. Before you start an audit, make sure you know what it aims to achieve, what resources and timeframes are needed, and what workforce is required. Also, consider cross-department support and external consultants. Once the requirements are clear, confirm the plan, goals, deliverables, and responsibilities. Now, the internal audit team starts the actual execution. To complete their audit mission, they gather data and information by talking to other business functions. Afterwards, the data is analysed and checked. This leads to an audit report or written reports for upper management.
- Product Knowledge. A deep and thorough understanding of the underlying product or service is necessary to audit a business function or process. Some products can be complex, and internal auditors must have the necessary product knowledge to perform their duties. An auditor at a bank should understand derivatives and fixed-income products. An auditor at a manufacturing company should understand how different departments work.
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- Regulatory Knowledge. Internal auditors examine regulatory reports. They audit financial statements and the data inside them. This requires a deep understanding of local laws and international accounting standards. Companies have their own internal guidelines, control mechanisms, and governance rules. These need ongoing training and professional development.
- Communication Skills. Internal auditors collect data from teams and report audit results to management and leadership. Both tasks require exceptional verbal, written, and interpersonal communication skills. Internal auditors examine regulatory reports. They audit financial statements and the data inside them. This requires a deep understanding of local laws and international accounting standards. Companies have their own internal guidelines, control mechanisms, and governance rules. These need ongoing training and professional development. Effective communication is necessary to get the relevant data to and from the correct people at the right time. Corporate leaders want clear and brief results. Internal auditors must tell them. Given the large amount of report writing, writing skills are essential for optimal communication.
- Data Analytics. Companies now want auditors who know data analytics and programming. Experience with SQL or other database tools helps to improve audit efficiency. Analytical skills are, thus, a must for most internal auditor jobs.
- Leadership Skills. Internal auditors work with a team of professionals to achieve their goals. They lead the team, handle the budget, assign tasks, coordinate efforts, manage conflicts, and use other skills to run the department. Internal auditors have their own chain of command, which can go up to the Chief Audit Officer or chief internal auditor. Moving up in rank means increased responsibility and more chances for professional development.
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Internal Auditor Role and Responsibilities
Internal auditors have similar roles and responsibilities in different companies. This means that their skills can be transferred. Usually, it’s the breadth and scope that vary. Many public companies have a head of internal audit. This person reports to the Audit Committee and leads a small team of auditors.
Typical internal auditor responsibilities are: assessing the 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; ensuring regulatory compliance; and communicating with stakeholders.
The role focuses on risk assessments and internal controls. Communication is needed at all levels, including upper and executive management. ERPs have changed and are important in every organisation. Internal auditors should be good with technology and assess ERPs. More on an internal auditor’s job description is here.
Which Companies Hire Internal Auditors?
To maintain a good reputation, companies should have strong internal audit practices. This helps improve the reliability of their risk management and internal controls.
The more risk assessments a company does, the less likely it is to have a damaged reputation. Internal auditing helps with risk assessments. Public companies now require internal auditors, and this trend is growing among medium and large businesses.
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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 progression in finance. To begin with, an internal auditor would get much wider company exposure than a typical accountant because of the very nature of their role. The internal auditor conducts audits on various processes, not just finance-related ones. Yet, financial statements will still be included. Gaining this experience helps in understanding risk assessment and developing a “risk management” mindset. Accountants often do this as their first role as financial controllers.
Internal auditors’ skills are valued in financial controller roles. Writing reports helps them create corporate documents. Experience with audit reports helps them oversee external auditors. To advance in your career, it’s important to have good communication skills. These skills are developed by interacting with people at all levels of the company.
The skills mentioned earlier in this article show that the role involves more than just “audit.” These skills are important for a financial director or CFO.
The career path of an internal auditor can differ based on personal preference. The most common route is to 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. Yet, such a path would require an ACA qualification, which is usually the preferred one by the Big 4.
An internal auditor can advance to become a financial controller or finance director. In these positions, their knowledge of finance, business, and technology would be helpful. You can find an internal auditor CV template and examples here.
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In the UK, internal auditors earn around 65k GBP on average. This amount can vary based on company size and job responsibilities. In listed companies, internal auditor roles are common. In private companies, they vary depending on the revenue. More on salary here.
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