What is Internal Auditing?
One of the most important professional roles that accountants play in the workplace is that of an organization's internal auditor.
Internal auditors play a key role in maintaining the financial health of both privately and publicly owned companies. They make sure that businesses are efficiently using their funds, while checking for signs of fraud, waste, and mismanagement. Auditors hold companies fiscally accountable while protecting the investments of owners and shareholders.
Internal audits are often regularly performed on a monthly, quarterly, or yearly basis, depending on the needs of each business.
What is an Internal Auditor?
An internal auditor is a member of an organization’s staff who is responsible for monitoring and evaluating the company’s business transactions. They watch for discrepancies in the flow of the way a company’s money is handled and ensure that fiscal integrity is maintained in all areas of business.
The auditor keeps an eye on finances to make sure nothing slips through the cracks, either due to negligence or illegal activity. They check transactional records to ensure that all financial data reported by a company is thorough and correct. Auditors help organizations capture an accurate snapshot of their complete financial situation and make practical business decisions with a full scope of knowledge.
An internal auditor plays an important role for a number of reasons. An auditor can make sure that the money of owners and shareholders is being used in an efficient manner, cutting back on fiscal waste and tightening up any leaks in the system. They’ll often check a company’s procedures, managerial structure, internal security, financial records, and transactional practices to make sure everything is in order.
Auditors can keep businesses accountable in terms of legal compliance, and make sure every financial detail is being handled appropriately according to state and industry regulations. They typically act as an outside consulting entity, reporting not to internal management but directly to a company’s board of directors. This ensures that auditors maintain the ability to report accurately and freely without feeling as though their job is being jeopardized in any way.
Auditors must adhere to the national rules and regulations set forth by the Auditing Standards Board. This is a high-ranking committee created by the American Institute of Certified Public Accountants (AICPA) to handle issues regarding standards and quality control specifically in the fields of auditing and attestation.
Areas of Specialty
For those who choose auditing as a career, there are job opportunities in a number of special concentrations. Most internal auditing positions come with the same basic responsibilities but can vary in the specific industry information you’ll need to know.
Here are several examples of concentrations in which internal auditors can focus their education and training:
Town, County, or State Government
A lot of complicated financial factors go into running a municipal area. Most local, regional, and state governments offer positions to internal auditors as a way to keep close tabs on all of their financial data.
Depending on the size of the area covered, auditing for a municipality can range anywhere from a single position to an entire department. Responsibilities may include going over financial records, checking internal security, assessing compliance with laws and regulations, and preparing fiscal reports.
Large Businesses and Corporations
Internal auditors play a vital role in checking the financial integrity of major corporations.
Most large-scale businesses (including every Fortune 500 company) have an entire internal auditing department on staff. This is a group of accountants, analysts, and consultants who make sure every detail is in compliance before handing over reports and data to external auditors. Their job is to make sure the business doesn’t inadvertently get itself in trouble for issues regarding taxation and other legal issues.
Corporate internal auditors also check internal controls within an organization, along with accounting methods, inventory records, and fraud prevention practices.
Hospitals and Medical Facilities
Most large hospitals and medical centers have an internal auditing department on payroll.
This specialization requires that auditors have a knowledge of healthcare specific laws and regulations, especially in relation to HIPAA and insurance rules.
Auditors in the medical field are on the lookout for fraud prevention gaps, security issues, insurance claims problems, and anything else that could prove to be a liability for a hospital or medical facility.
On the flip side, health insurance companies are also a major employer of internal auditors across the country.
Auditors working for health insurance corporations look at financial data surrounding claims that have been paid out. They play a large role in risk detection and management, and make sure that finances are being handled efficiently and legally.
Frequently changing health insurance regulations mean that internal auditors in this field need to pay particularly close attention to currently laws, and make sure they remain up to date in their knowledge of the industry.
Colleges and Postsecondary Education
Colleges and universities often work closely with banks and financial institutions. Many schools keep internal auditors on staff to make sure that every detail is handled correctly and efficiently.
Auditors working in a school setting must be aware of the regulations surrounding loans, grants, and other sources of financial aid. This is another field in which rules are frequently changing, and internal auditors can help schools make sure they remain in compliance with new laws.
Education Needed for an Internal Auditing Career
In order to be qualified for a career as an internal auditor, students will have to complete a minimum education of a bachelor’s degree in accounting, finance, business, or another related field. Specialized courses covering auditing topics may also be required. If you’re still working on your education, make sure to discuss your career plans with your student advisor to ensure you’re on the right path.
After completing a bachelor’s degree, internal auditors have the choice between entering the job force with an entry level position or going back to school to pursue a graduate degree in your chosen concentration.
Auditors should be knowledgeable in areas like:
Recently, the Institute of Internal Auditors (IIA) implemented the Internal Auditing Education Partnership (IAEP) program. This helps give students the background they need to master internal auditing at a collegiate level, preparing them for a career in internal auditing and the Certified Internal Auditing (CIA) exam. The IAEP program is currently available in 48 universities across 12 countries worldwide.
A master’s in business administration (MBA) may also be a worthwhile investment to land a lucrative position in the internal auditing field. Many employers prefer to hire auditors with an MBA over those with just a bachelor’s degree.
When it comes to certifications in their chosen career, internal auditors have a variety of options to suit their needs. Whether an auditor wants to start their career quickly or sink their teeth into an advanced certification, there’s a number of options for every decision.
Certified Public Accountant License
A certified public accountant (CPA) is widely considered to be the top level of accounting certification available. CPAs are legally authorized to perform auditing and attestation tasks, where an accountant without a certification may find their abilities to be much more limited.
Getting a CPA license is a long and grueling career path, but the salary payoff can be worth it. CPAs can handle any number of accounting tasks and are in high demand due to their wide range of specialized skills.
In order to qualify for a career as a CPA, students must complete a bachelor’s degree and a total of 150 semester hours. The degree doesn’t necessarily have to be in accounting, but students should check with their state board of accountancy to make sure they will have met their education requirements upon graduating.
Upon completing their education and paying the required fees, CPA candidates will be eligible to take the Uniform CPA Examination. Only half of all test takers pass the exam, but those who do will be able to move on to the experience stage of the CPA licensure process.
Each state has their own criteria for the work requirement of the certification process. Most require at least one year of verifiable full-time employment in the field of accounting, typically under the supervision of a licensed CPA. This must cover a vast majority of the tasks a CPA might handle upon venturing out on their own in their chosen field.
To maintain a CPA license, accountants must complete a predetermined number of continued professional education (CPE) hours, generally in cycles of two or three years.
Certified Internal Auditor Certification
A CIA certification provides students with a high level of comprehension in the specific area of internal auditing. It doesn’t cover as many topics as the CPA certification, but requires less time and work before achieving the end goal.
The CIA certificate is offered by the IIA and is considered the standard in auditing accounting degrees. To qualify for the CIA, students must complete an associate’s degree or higher, and must be able to provide a character reference from a CIA, a specialized auditor, or the candidate’s supervisor.
Upon completing the education requirement, graduates may be eligible to sit for the CIA exam. Additionally, CIA candidates will have to complete their work requirement, and will not receive certification until both the examination and experience segments of the process are complete.
Work requirements will vary based on the education each individual candidate holds upon taking the exam.
The IIA also offers the following specialty certifications outside of the regular CIA:
These are single part exams that require less experience than the more comprehensive CIA. Candidates who don’t qualify for CIA certification may want to consider a specialized certification instead.
While the CIA certificate is much cheaper and easier to earn, a CPA license can unlock the door to many more opportunities than any other type of accounting certification. Ambitious auditors who hope to someday reach the top of their career ladder may consider obtaining both certifications as a smart investment for their future.
Internal Auditor Salary and Career Outlook
The future is bright for those in working in the internal auditing field. According to the Robert Half Salary Guide, internal auditing is one of the top 10 on-the-rise accounting and finance careers in the hiring market. The U.S. Bureau of Labor Statistics predicts that the number of internal auditor jobs will rise by 10 percent before 2026.
This is because internal auditors are consistently in high demand. Since the bubble of corporate scandals burst around the turn of the millennium, the Sarbanes-Oxley Act of 2002 has required increased transparency in matters of accounting and corporate finance. Internal auditors can act as a safeguard against corporate fraud, while also assuring executives that they won’t be the next business to fall in scandal.
Internal auditing may also be an appealing career path for accountants who wish to climb the corporate ladder. A career in internal auditing means a lot of face time with the board of directors, which can lead to increased opportunities in the future.
According to the Bureau of Labor Statistics, the median annual salary for auditors in 2017 is reported at $69,350 per year. Statistics show that the pay received by accountants and auditors is closely tied to the overall health of the national economy. As businesses grow and revenues soar, more internal auditors will be needed to make sure financial operations continue to run smoothly.