Financial auditors inspect accounting data, financial records, and operational aspects of a business to determine whether its financial statements follow generally accepted accounting principles (GAAP). Financial auditors also evaluate and test internal controls and governance. They regularly analyze risk management processes to provide objective opinions on whether the systems are adequate, efficient, and effective. Additionally, they work to uncover, investigate, and prevent all kinds of fraud within an organization.
- Financial auditors inspect financial records to determine whether a company's financial statements follow generally accepted accounting principles (GAAP).
- They also conduct investigations to uncover and prevent all kinds of fraud within an organization.
- Internal auditors work for a company, overseeing its books and operations, while external auditors usually work for big accounting firms.
Types of Financial Auditors
Financial auditors may work in an external or internal capacity.
External auditors provide auditing services to organizations on a short-term contractual basis. The most common function of an external auditor is to provide an objective public opinion concerning the organization's financial statements and whether they fairly and accurately represent the organization's financial position. External auditors are typically employed by public accounting firms.
Internal auditors are directly employed by the organizations they are tasked with auditing including corporations, nonprofits, and government agencies. Internal auditors work independently within the organization to provide objective financial and operational audits touching on many aspects of the organization's day-to-day operations.
Internal auditors at publicly traded companies generally report to the audit committee of the company's board of directors. This ensures auditors are free to report on operational problems or instances of fraud no matter who is involved within the company.
Career Path of a Financial Auditor
A financial auditor can begin working in a junior position in the field immediately after obtaining a qualifying degree and a license or professional certification if one is required. Some financial auditors transition into these positions after working in another business field, such as accounting, finance or computer information systems.
With adequate experience and a record of good performance, both external and internal financial auditors can typically move into more senior positions with responsibility for complex audit projects. Senior financial auditors plan audits and lead audit teams to complete projects. Depending on the organization, an opportunity for advancement into higher-level management roles may be possible.
What Type of Education Is Needed?
An external auditor who works in a public accounting firm generally requires either a bachelor's degree or a master's degree in accounting. This matches the educational qualification for a Certified Public Accountant (CPA) license, which is generally required to work as an external auditor.
Internal auditors do not typically require such a license, so bachelor's degree subjects such as finance and other business disciplines may also be acceptable if candidates have appropriate experience and skills.
How to Get CPA Certification and Licensing
Most financial auditors working for public accounting firms must obtain the CPA designation, which is a professional certification awarded by the American Institute of Certified Public Accountants. Internal financial auditors are often encouraged to get the CPA designation, but it is not generally mandatory.
Eligibility requirements for the CPA designation vary from state to state. Most candidates need to complete academic programs in accounting and show 150 semester hours of qualifying coursework in accounting, business, and general education topics, as well as ethics coursework. While a master's degree is not required, most students take at least some graduate courses to meet the coursework standard. Once the educational requirements are complete, candidates must also pass the Uniform CPA Examination to complete the certification.
In addition to the certification, most financial auditors working for public accounting firms also need to obtain state CPA certification. Requirements vary, but most states' licensing standards require a CPA designation and two years of professional work experience in public accounting. Financial auditors may work in junior positions under the supervision of a licensed CPA to count as the appropriate work experience requirement for a license.
Additional Certifications for an Auditor
The most important professional certification for internal auditors is the Certified Internal Auditor (CIA) designation, awarded by the Institute of Internal Auditors. To qualify for this designation, candidates need a bachelor's degree and two years of qualifying work experience or a master's degree and one year of work experience. A combination of post-secondary education and qualifying work experience amounting to seven years is also acceptable. Candidates must pass an examination to complete the certification.
Other certifications that may be requested by some employers include the Certified Fraud Examiner (CFE) designation and the Certified Government Auditing Professional (CGAP) designation.