What is the difference between internal auditors and external auditors? Well, first of all, what is an auditor, in general? An auditor is someone who ensures that an organization's or an individual's financial statements, such as taxes and public records are accurate. It is very important that companies and individuals have their financial statements properly prepared and evaluated for processing. Internal auditors are employees of a company to assess its financial system to ensure that right financial practices are being performed. External auditors are hired independently through auditing firms to make a similar assessment.
When does auditing occur? There are many cases where fraud, mismanagement, and unethical practices are carried on by a company or by an individual. Being audited can be one of the most stressful experiences in an individual's life. Many individuals make mistakes they are not even aware of and these may cause problems in the future. There are many circumstances that can call for an audit, such as, not reporting income, errors in math on documentation, wrong personal information, too many high deductions, and false bookkeeping for businesses. All these can lead to receiving a letter from the Internal Revenue Service.
Those who are looking to become certified internal auditors can do so by passing the Certified Internal Auditor program administered by the Institute of Internal Auditors. Becoming certified shows that an auditor has a very high, extensive knowledge of procedures, and principles, and will provide the best possible internal auditing service. Those who have worked for no less then two years in the internal auditing field may become certified by the Institute of Internal Auditors.
In recent years more accounting scandals, bribery charges, scams, and embezzlement cases have taken place, so being certified is increasingly becoming more important. Companies are more cautious of unsavory practices and becoming more aware of the consequences. Internal auditors may also construct initiatives to help a company save money by decreasing expenditure. Internal auditors must ensure that the basic accounting principles are put into effect.
The economic situation plays a role in the demand for internal and external auditors. Companies that are growing or newly forming will eventually have to have audit performed on them so the demand for would increase. There are currently an estimated 1.3 million auditor and accounting positions and that number is expected to rise to over 1.5 million within the next decade. That means over 200,000 jobs should become available for those who meet the necessary qualifications.
External auditors, while performing the same duties as internal auditors, also express opinions about the companies' financials statements being true and fair. External auditing usually takes place at the end of the year while internal auditing may be carried out any time during the entire year.
The Association of Certified Fraud Examiners may certify those who wish to seek additional auditing training. This type of certification will show that the individual is proficient in detection and deterrence of fraud practices. Individuals who do receive this certification may even enter different fields such as criminology.
Those who wish to be an internal or external auditor should have at least a bachelor's degree in accounting and should be a CPA or Certified Public Accountant. Many states implement the CPA through the American Institute of Certified Public Accountants. Those who do take the four-part test, only around 25% pass all four parts on their very first try, so yeah it is difficult.
If an individual doesn't mind dealing with numbers on a continual basis a career as an internal or external auditor could be possible. Wages for an internal and external auditor are very good with the average salary being $47,000 per year. Those who are in their first year may earn less but the opportunities for advancement are great. Those who have many years of experience in the internal or external auditing could earn upwards of $200,000 per year, in management and director positions.
Some of the better-known auditing firms are Ernst & Young, PricewaterhouseCoopers, Deliotte, and KPMG.
