How to Become an External Auditor (Audit Adventures Await!)
If you’ve ever dreamed of safeguarding financial accuracy or wondered what it takes to become an external auditor, you’re in the right place.
In this guide, we’ll explore the EXACT steps you need to take to launch your career as an external auditor. We’ll talk about:
- The skills you need.
- The education that can help you get there.
- How to land a job as an external auditor.
So, whether you’re a finance novice or a number-crunching professional looking to upskill, stay tuned.
We’re about to unravel the blueprint to become an external auditor.
Let’s get started!
Steps to Become an External Auditor
Step 1: Understand the Role and Responsibilities
External auditing is a crucial role in any organization that includes the examination and evaluation of an organization’s financial information.
The primary responsibility of an external auditor is to provide an independent and objective assessment of the financial statements of a company.
This involves checking the accuracy of records, ensuring that the company complies with the legal regulations, and identifying any fraudulent or misrepresentative activities.
Before deciding to pursue a career as an external auditor, understanding the role and responsibilities associated with the job is vital.
Apart from checking financial records, an auditor may also need to evaluate a company’s internal control systems, assess risks, and offer recommendations for improvement.
This role involves a lot of critical thinking, attention to detail, and a high level of integrity.
Therefore, it’s important to assess whether your skills and interests align with the nature of the job.
An external auditor often has to work with different clients and manage strict deadlines, so good communication skills and the ability to work under pressure are also essential.
You can gain a comprehensive understanding of the role by interning at an audit firm, attending related seminars or workshops, or speaking with professionals in the field.
This will provide you with a realistic picture of the day-to-day responsibilities of an external auditor.
Step 2: Acquire a Relevant Educational Background
Aspiring to be an external auditor necessitates a strong academic background in related fields, particularly in accounting or finance.
A Bachelor’s degree in accounting, finance, business administration or related disciplines is the most common path towards this career.
In these programs, you’ll learn about financial reporting, taxation, cost accounting, and auditing principles.
Some universities also offer specific courses in external auditing that provide a more in-depth understanding of the role, responsibilities, and ethical considerations of an external auditor.
These courses may also cover different audit techniques and methods used in examining a company’s financial statements.
During your studies, seek internship opportunities with auditing or financial firms.
This will provide you with practical experience, enhance your understanding of the field, and potentially open doors for future job opportunities.
If you wish to specialize or aim for higher positions, you may also consider pursuing a master’s degree in accounting or business administration.
Remember, the objective is not just to fulfill the educational requirement but to acquire the necessary knowledge and skills to execute the role of an external auditor effectively.
Step 3: Gain Knowledge of Accounting Principles and Standards
As an aspiring external auditor, it’s crucial to develop an in-depth understanding of accounting principles and standards.
These rules guide how organizations maintain and report their financial information.
External auditors have to be well-versed in Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) as they are globally recognized standards in accounting.
Understanding accounting principles will enable you to analyze a company’s financial statements accurately, identify errors or fraudulent activities, and ensure the organization is following all relevant laws and regulations.
To gain this knowledge, you can take advanced accounting courses as part of your degree program or pursue additional certifications such as the Certified Public Accountant (CPA) or Certified Internal Auditor (CIA) designations.
Also, be sure to stay updated on any changes or updates to these standards, as they can often change and impact how you perform your auditing duties.
You can do this by attending professional development courses, workshops, or seminars, reading relevant accounting publications, or joining professional accounting organizations.
Remember, a profound understanding of accounting principles and standards is a fundamental requirement for an external auditor, as it forms the basis of their daily work.
Step 4: Obtain Certifications
In the field of external auditing, obtaining professional certifications is a crucial step in enhancing your career prospects.
Certifications not only validate your knowledge and skills but also enhance your credibility, making you a sought-after professional by organizations.
The Certified Public Accountant (CPA) credential is highly recommended for aspiring external auditors.
The CPA examination is rigorous and covers topics including Business Law and Professional Responsibilities, Auditing Procedures, and Financial Accounting and Reporting.
Another valuable certification for external auditors is the Certified Internal Auditor (CIA) credential.
While it is not directly focused on external auditing, the knowledge it imparts is beneficial in understanding the auditing process from an internal perspective.
The Certified Fraud Examiner (CFE) credential can also be useful, especially if you plan to specialize in fraud detection and prevention.
In order to obtain these certifications, you will need to pass the respective examinations.
It’s important to note that these examinations typically require a significant amount of preparation, and you may need to take preparatory courses or self-study using recommended study materials.
Remember, obtaining these certifications is not a one-time process.
You will need to participate in continuing professional education programs to keep your knowledge up-to-date and maintain your certifications.
The more credentials you have, the better your chances of progressing in your career as an external auditor.
Step 5: Gain Relevant Work Experience
As an aspiring external auditor, gaining relevant work experience is crucial to better understand the practical aspects of auditing.
This experience can be attained through internships, part-time or entry-level jobs in auditing or accounting firms.
You could also look for roles in the finance department of any organization, such as a junior accountant or finance assistant, as they often involve tasks that are directly related to auditing.
Your responsibilities might include preparing financial statements, analyzing financial data, and ensuring compliance with financial regulations, all of which provide valuable experience for a future role as an external auditor.
Additionally, working under experienced auditors or accountants can provide a great opportunity for mentoring and learning industry best practices.
Remember, the goal is to familiarize yourself with the auditing process, the regulatory environment, and the financial operations of businesses.
You should also aim to improve your analytical, communication, and problem-solving skills, as these are vital qualities for any successful auditor.
After gaining substantial work experience, you may qualify for more advanced positions or consider pursuing certifications to enhance your professional credentials and increase your chances of landing a role as an external auditor.
Step 6: Develop Analytical and Detail-Oriented Skills
As an external auditor, it’s crucial that you develop strong analytical skills and pay attention to detail.
These skills are fundamental to your role as you will be required to review and assess a company’s financial statements and accounting books for accuracy and compliance with laws, regulations, and industry standards.
Analytical skills will help you identify trends, interpret data, and make informed decisions.
These skills are also important for finding inconsistencies or discrepancies in financial statements and reports.
Additionally, being detail-oriented is crucial as it enables you to meticulously evaluate financial records, spot minor errors, and ensure accurate reporting.
To develop these skills, you can take relevant coursework or training in data analysis, financial auditing, or accounting.
Practical experience through internships or entry-level positions can also be beneficial.
Regularly practicing problem-solving and critical thinking exercises can improve your analytical abilities, while tasks requiring precision and concentration, like document review or data entry, can help enhance your detail-oriented skills.
Remember, as an external auditor, your assessments can significantly impact a company’s future financial decisions.
Therefore, having strong analytical and detail-oriented skills can make you a valuable asset in the auditing industry.
Step 7: Learn to Use Audit Software
As an external auditor, you’ll need to be familiar with various audit software tools.
These tools are designed to streamline and automate the auditing process, allowing auditors to easily access and analyze data, identify risks and compliance issues, and generate detailed reports.
There are numerous audit software tools on the market, and the specific tool you’ll use will often depend on the firm you work for.
However, most audit software share similar features and functionalities, so learning to use one can often make it easier to adapt to others.
When choosing an audit software to learn, consider tools that are commonly used in the industry.
Some popular options include ACL, TeamMate, and IDEA.
These tools offer a range of features, including data analysis, risk assessment, and report generation.
Take the time to familiarize yourself with the software.
Learn how to input and analyze data, how to use the software to identify risks and compliance issues, and how to generate and interpret reports.
This may involve taking online tutorials, attending training sessions, or even earning a certification.
Remember, mastering audit software is not just about learning how to use the tool.
It’s also about understanding how it can be leveraged to improve the auditing process and deliver more accurate, comprehensive results.
This understanding will be invaluable in your role as an external auditor.
Step 8: Enhance Communication and Interpersonal Skills
As an external auditor, it’s vital to have exceptional communication and interpersonal skills.
Auditing involves frequent interaction with clients and team members, so you need to effectively express your thoughts, explain complex concepts in simple terms, and be able to listen to and understand others effectively.
You might want to consider taking courses in communication, public speaking, or business writing to improve your skills.
Participating in debates or public speaking clubs can also help you to enhance your communication abilities.
Interpersonal skills are equally crucial in this field.
You’ll often need to work closely with individuals of various job levels within an organization, from entry-level employees to C-suite executives.
Thus, being able to establish a good rapport, demonstrating empathy, and showing emotional intelligence is critical.
Understanding various cultures and business etiquette, being able to negotiate, and demonstrating problem-solving skills are also important aspects of interpersonal skills in auditing.
You can develop these competencies through workshops, seminars, role-playing, and real-world experience.
Remember, as an external auditor, your role is not just to find and report problems but also to provide solutions and advise on best practices.
Thus, your communication and interpersonal skills can greatly impact your effectiveness in this role.
Step 9: Join Professional Auditing or Accounting Organizations
Joining professional auditing or accounting organizations is an important step in advancing your career as an external auditor.
These associations provide a wealth of resources, including networking opportunities, continuing education courses, up-to-date industry news, and access to a community of professionals who can provide guidance and support.
Networking can be particularly valuable in the auditing industry, where reputation and references can play a significant role in career advancement.
Networking events, conferences, and seminars provide excellent opportunities to connect with other professionals in your field, learn about new job openings, and stay abreast of changes in the industry.
Professional organizations can also offer opportunities for continuing education.
As an external auditor, it’s important to stay informed about changes in accounting laws and regulations.
Many professional organizations provide training seminars, webinars, or courses that can help you stay up-to-date on these changes and earn continuing education credits.
Finally, membership in a professional organization can demonstrate your commitment to the field of external auditing.
It shows potential employers that you are serious about your professional development and staying current in your field.
Some of the most renowned organizations for auditors include the American Institute of CPAs (AICPA), the Institute of Internal Auditors (IIA), and the Information Systems Audit and Control Association (ISACA).
Before joining an organization, make sure that it is reputable and that it provides the resources and benefits that will best help you in your career as an external auditor.
Step 10: Seek Employment Opportunities
After completing your education and obtaining necessary certifications, you’ll need to start looking for job opportunities as an external auditor.
Positions for this role can be found in public accounting firms, government agencies, corporations, and non-profit organizations.
Employers typically look for candidates with strong analytical skills, attention to detail, and knowledge in finance and accounting.
Begin your job search by checking online job boards, company websites, and professional networking sites like LinkedIn. Tailor your resume and cover letter to highlight your auditing skills and experiences.
Prepare for interviews by researching common questions and practicing your responses.
You could also consider internships or temporary positions as a way to gain real-world experience.
These opportunities can often lead to full-time job offers.
Furthermore, networking can be crucial to your job search.
Attend industry events, join professional accounting and auditing organizations, and connect with professionals in the field to uncover job opportunities that may not be advertised.
Remember, the more experience you gain, the more opportunities will open up for you.
You might even want to consider taking on roles that offer the chance to specialize in a specific industry or type of audit, such as IT or environmental auditing, to further advance your career.
Step 11: Continue Professional Education
As an external auditor, it’s essential to maintain and enhance your professional knowledge and skills to stay relevant in the ever-changing financial landscape.
Continuous professional education (CPE) is a crucial component of your career development.
This can be achieved through various means, including attending industry workshops, participating in professional seminars, or enrolling in advanced courses related to auditing and finance.
The main aim is to keep up-to-date with the latest audit standards, techniques, and changes in laws and regulations that impact auditing.
Some professional organizations, like the Institute of Internal Auditors or the American Institute of Certified Public Accountants, require a specific number of CPE hours to maintain your certification.
Further, CPE courses can also help external auditors expand their knowledge and skills in more specialized areas such as fraud detection, IT auditing, or international auditing standards.
Remember, ongoing learning and professional development is the key to staying competitive in the auditing field and can open up opportunities for career advancement.
Step 12: Consider Specialization
As an external auditor, you have the option to specialize in a particular industry or sector.
This could be based on the types of companies you prefer to work with, the industries you’re most familiar with, or where you see the most growth potential.
Some auditors choose to specialize in areas such as healthcare, finance, technology, manufacturing, or non-profit organizations.
Specializing allows you to deepen your understanding of specific regulations, risks, and operational structures associated with that industry.
It can make you a more attractive candidate to prospective employers and clients within that industry.
Moreover, you can also choose to specialize in certain areas of auditing such as IT auditing, environmental auditing, or internal control auditing.
These specializations require additional training and certification but can open up new career opportunities and enhance your professional growth.
Remember to keep updated on industry trends and regulations, as they tend to evolve over time.
Joining professional organizations and attending industry-specific training and conferences can be beneficial to stay informed and connected.
Step 13: Adhere to Ethical Guidelines and Maintain Independence
As an external auditor, it’s crucial that you strictly adhere to the ethical guidelines provided by professional accounting bodies in order to maintain the integrity of your work.
These rules outline the moral responsibilities of an auditor, including the need for honesty, confidentiality, objectivity, and professionalism.
Disregarding these guidelines can result in disciplinary action, damage to your professional reputation, and even legal consequences.
In addition to following ethical guidelines, external auditors must also maintain independence from the company they are auditing.
This includes both independence in fact and appearance.
Independence in fact refers to the actual independence of the auditor, where they perform their work free from influences that could compromise their judgement.
Independence in appearance refers to avoiding situations that could appear to compromise the auditor’s integrity or objectivity, even if this is not the case.
This independence ensures that the audit is impartial and unbiased, which is essential for stakeholders who rely on the audit results to make informed decisions.
To maintain this independence, avoid any conflicts of interest such as having a financial interest in the company you’re auditing or having a close personal relationship with someone in the company.
Throughout your career as an external auditor, you’ll need to continuously uphold these ethical standards and independence to provide valuable, trustworthy audits and establish a strong professional reputation.
External Auditor Roles and Responsibilities
External Auditors review a company’s financial statements and operations to determine if the company’s records are accurate, its controls are effective, and its operations are conducted in accordance with established laws and regulations.
They have the following roles and responsibilities:
Financial Statement Auditing
- Examine financial statements to ensure they reflect true business transactions.
- Conduct risk assessments of financial statements.
- Verify assets and liabilities by comparing items to documentation.
Compliance Auditing
- Check compliance with local, state, and federal laws.
- Examine operations to ensure they are in line with corporate policies.
- Assess whether the company’s internal controls are effective.
Report Writing
- Prepare and present audit reports that reflect the audit results.
- Document process and prepare audit findings memorandum.
Consulting
- Provide advice to management on how to improve systems and processes.
- Discuss audit findings and recommendations with senior management.
Data Analysis
- Analyze data to detect deficient controls, duplicated effort, fraud, or non-compliance with laws, regulations, and management policies.
- Use data analytics tools for audit testing.
Continuous Learning
- Stay updated with company standards, regulations, and best practices.
- Attend professional development training and workshops.
Communication
- Effectively communicate audit findings to stakeholders.
- Maintain open communication with management and auditees.
Teamwork
- Work effectively in a team during audit projects.
- Collaborate with internal teams to increase efficiency in the audit process.
Independence
- Maintain independence in judgement and actions to ensure unbiased audits.
Confidentiality
- Respect the confidentiality and sensitivity of information.
- Ensure all audit documents are kept secure.
What Does an External Auditor Do?
External Auditors are specialized professionals who typically work for independent third-party agencies or as self-employed individuals.
They are hired by companies to perform audits on their financial statements and ensure compliance with laws and regulations.
Their primary role involves examining a company’s financial records to verify their accuracy and reliability.
They examine the effectiveness of a company’s internal controls and evaluate the ways in which a company is using its resources.
External Auditors also assess the risk of fraud or other financial mismanagement within a company.
This involves checking for discrepancies and irregularities in the company’s financial documents and reporting their findings to the necessary authorities or company management.
They are also tasked with presenting their audit findings in a comprehensive report and may be required to discuss these findings with the company’s management team or board of directors.
Furthermore, External Auditors assist in improving a company’s operations by providing recommendations based on the results of their audits.
These recommendations may include suggestions for improving financial management practices, enhancing internal controls, or identifying areas where efficiency could be increased.
Overall, the role of an External Auditor is to provide an independent and objective view of a company’s financial health and operational efficiency.
This helps to increase transparency and trust between the company and its stakeholders.
Essential External Auditor Skills
- Analytical Skills: External auditors must be able to analyze and interpret data in order to identify potential issues or discrepancies within a company’s financial records.
- Detail-Oriented: Accuracy is crucial in auditing. Auditors need to pay close attention to the details of financial statements and other documents to spot any errors or discrepancies.
- Communication: Auditors need to communicate effectively both in writing and verbally. They must present their findings clearly and concisely to non-financial stakeholders and be able to explain complex financial terms in a manner that is easy to understand.
- Knowledge of Accounting Principles: A strong understanding of accounting principles and financial regulations is a must. Auditors need to know the rules and standards that businesses should be following.
- Objectivity: External auditors must be impartial and unbiased in their work. They need to review the organization’s financial records objectively, regardless of any personal relationships with the company.
- Integrity: Confidentiality is a key aspect of an auditor’s role. They must maintain the highest level of integrity when handling sensitive financial information.
- Problem-Solving: If auditors identify any financial discrepancies, they must be able to determine the cause and recommend appropriate solutions to rectify the issue.
- Knowledge of Auditing Software: Familiarity with auditing software is essential as it is frequently used to streamline the auditing process and to analyze large sets of data.
- Time Management: Auditors often work within tight deadlines and must manage their time effectively to complete their work on schedule.
- Report Writing: Auditors must be able to write clear, concise and comprehensive reports summarizing their findings and recommendations.
- Understanding of Business Operations: A comprehensive understanding of the business operations and industry of the organization being audited is important to effectively assess its financial health.
- Project Management: Auditors often work on multiple projects at once. Project management skills, including task prioritization and scheduling, are needed to ensure successful completion of all audits.
- Flexibility: Auditors need to be adaptable and flexible as they often need to travel to client sites and work outside traditional business hours.
External Auditor Career Path Progression
The Foundation: Junior External Auditor
Starting off as a Junior External Auditor, you are expected to absorb knowledge like a sponge and gain practical experience.
Your responsibilities may include assisting in audit procedures, analyzing financial documents, and preparing reports under the supervision of senior auditors.
Here are some tips for success in this role:
- Acquiring Knowledge: Stay updated with the latest auditing standards and regulations.
- Seek Guidance: Don’t hesitate to ask questions and seek help from senior colleagues.
- Attention to Detail: Develop an eye for detail to detect irregularities in financial statements.
The Ascent: External Auditor
With experience and confidence, you’ll move up to the role of an External Auditor.
Your responsibilities will increase and you’ll handle more complex audits, participate in planning and strategizing audit procedures, and become a key part of the auditing team.
Here’s how to excel in this stage:
- Problem Solving: Enhance your problem-solving skills by dealing with complex auditing issues.
- Effective Communication: Communicate your findings effectively to the management and clients.
- Professional Ethics: Adhere to the professional ethics and standards of auditing practice.
Reaching New Heights: Senior External Auditor
The next step on the career ladder is the Senior External Auditor position.
You are now recognized for your expertise and become a leader within the team.
You’ll guide audit procedures, supervise junior auditors, and communicate findings to stakeholders.
To thrive as a Senior External Auditor:
- Leadership: Guide junior auditors and help them grow professionally.
- Strategic Thinking: Plan and execute audit strategies effectively.
- Strong Networking: Build strong professional relationships with clients and stakeholders.
Beyond the Horizon: Audit Manager and Beyond
As your career advances, you may become an Audit Manager or Director of Auditing.
These roles involve greater responsibilities, leadership, and strategic decision-making.
Here’s what to focus on:
- Management Skills: Develop strong leadership and communication skills to guide your team effectively.
- Technical Expertise: Be updated with the latest auditing tools and techniques.
- Decision Making: Make informed decisions on audit methodologies and strategies.
Pinnacle of Success: Chief Audit Executive or Partner
You may reach roles like Chief Audit Executive or Partner in an audit firm at the highest rungs of the external auditing career ladder.
Here, you will be responsible for shaping the overall audit strategy of the organization, making critical decisions, and managing larger teams.
External Auditor Salary
Entry-Level External Auditor
- Median Salary: $52,000 – $65,000 per year
- Entry-level external auditors typically have 0-2 years of experience and usually hold a bachelor’s degree in accounting or finance. Certification as a CPA, CFE, or CIA is often beneficial.
Mid-Level External Auditor
- Median Salary: $65,000 – $85,000 per year
- Mid-level auditors have 2-5 years of experience and often take on more complex auditing tasks. They usually hold CPA, CFE, or CIA certifications and may have a master’s degree in a relevant field.
Senior External Auditor
- Median Salary: $85,000 – $105,000 per year
- Senior auditors have more than 5 years of experience and are usually responsible for planning, executing, and managing audits. They also often mentor junior auditors.
Audit Manager / Audit Director
- Median Salary: $105,000 – $140,000+ per year
- These roles require substantial experience and generally involve managing a team of auditors, overseeing audits, and liaising with clients and regulatory bodies. CPA, CFE, or CIA certifications are typically required, and many audit managers or directors hold master’s degrees.
Chief Auditor / VP of Audit
- Median Salary: $140,000 – $200,000+ per year
- These high-level positions require extensive auditing experience and a deep understanding of regulatory compliance. They involve setting audit strategies, managing a large team of auditors, and interacting with senior management and board members.
External Auditor Work Environment
External Auditors typically work in an office setting within auditing firms, but their job often includes regular travel to various client sites for field work, reviewing financial statements, and conducting interviews.
The work schedule of an external auditor can be quite demanding, particularly during the ‘busy season’ which is usually the beginning of the year when most companies are getting their accounts audited.
Overtime is often required during this time.
External Auditors often work in teams, and interaction with clients is a key aspect of the job.
They need to communicate effectively and maintain professional relationships with clients.
After gaining experience and establishing a strong reputation in the field, an External Auditor may choose to start their own consulting firm or move into higher-level management positions within an existing company.
FAQs About Becoming an External Auditor
What qualifications are required to become an external auditor?
To become an external auditor, you usually need a bachelor’s degree in accounting or a related field.
Additionally, many employers prefer auditors who are Certified Public Accountants (CPAs), which requires additional education, a comprehensive exam, and a specific amount of work experience.
Key skills include a strong understanding of accounting principles and regulations, excellent analytical abilities, attention to detail, and strong communication skills to effectively present findings.
How long does it take to become an external auditor?
The process of becoming an external auditor typically takes about four years to complete a bachelor’s degree.
If you intend to become a Certified Public Accountant (CPA), it may take an additional 1-2 years to fulfill the educational requirements and pass the CPA exam.
Gaining practical experience through internships or entry-level positions can also be beneficial.
Can I become an external auditor without a degree?
While it’s technically possible to enter the auditing field without a degree, it’s highly uncommon and would likely limit your opportunities for advancement.
Most external auditors have at least a bachelor’s degree in accounting or a related field, and many also hold advanced degrees or certifications such as the CPA.
Employers typically value these credentials as they demonstrate a solid understanding of accounting principles and regulatory standards.
Is being an external auditor a stressful job?
Being an external auditor can be stressful at times due to the nature of the work.
Auditors often work under tight deadlines, especially during the busy season which is usually at the end of the fiscal year.
They also have significant responsibilities, as their findings can have a major impact on a company’s financial reporting and compliance status.
However, the level of stress can vary depending on the individual’s time management and coping skills.
What are the prospects for external auditors in the future?
The job outlook for external auditors is projected to grow in the coming years, driven by an increasing need for accountability in financial reporting.
As businesses continue to face stricter regulations, the need for qualified external auditors to ensure compliance and transparency in financial reporting is expected to rise.
Furthermore, auditors with a strong understanding of emerging technologies and their impact on financial operations will be in high demand.
Conclusion
And there you have it.
Embarking on a journey to become an external auditor is no small task, but it’s undoubtedly rewarding.
Equipped with the right skills, education, and determination, you’re well on your way to making a significant impact in the world of finance.
Remember, the journey may be difficult, but the rewards are endless. Your expertise could lead to major improvements in financial transparency and business ethics.
So, take that first step. Immerse yourself in knowledge. Network with industry professionals. And most importantly, never stop scrutinizing.
Because the world is waiting for your financial acumen.
And if you’re looking for personalized guidance on starting or advancing your career in external auditing, check out our AI Career Path Advisor.
This free tool is designed to offer tailored advice and resources to help you navigate your career path effectively.
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