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Are considering a career in Audit, specifically, those looking to become an External Auditor? Here are some thoughts on the questions you want answered…
Is a career in auditing for you?
You can feel the tension and stress levels rising in the accounts department as the audit draws nearer. Just like teachers praying for the kids to behave when the Ofsted inspectors descend, accountants look on nervously as auditors meticulously scrutinise their team’s work. The financial police are in the building and no one is safe!
In truth, it’s rarely so dramatic. The only accountants who need to worry are those who are hiding something or are deliberately producing false financial statements. Assuming the business is legitimate, the visit from an auditor is an opportunity to reinforce good practice and correct any reporting errors.
Rather than working on one business, external auditors are presented with the challenge of understanding the finances of a wide variety of organisations, in both the public and private sectors.
Why are external auditors needed?
An external auditor is appointed by the shareholders or directors of a company. Typically, an external auditor will work for a Big 4 or large accountancy firm. However, this is not exclusively the case, a lot of mid-tier and even smaller firms have sizable audit portfolios.
Although large corporate audits are probably the most common, not-for-profit and charity audits make up a lot of audit work. If you have an interest in working for ethical organisations, there is certainly a career to be had in audit.
An external auditor examines financial records and other data to provide shareholders, investors, and market regulators with a clear picture of how the business is performing. As well as ensuring the business is compliant, the auditor will also make recommendations for improvements.
There are many reasons why an external audit is a useful and beneficial exercise, and a key motivation is to protect shareholders.
The Institute of Chartered Accountants in England and Wales (ICAEW) states that:
Audits of financial statements are needed to hold directors to account.
The directors who run companies manage assets entrusted to them by the shareholders and by third parties who extend credit to them. Many others also have an interest in how companies are run. Holding directors to account involves requiring them to prepare financial statements. For financial statements to be credible, an independent audit is required. Auditors report to shareholders on the ‘truth and fairness’ of the financial statements prepared by directors.
What does an external auditor earn?
The most recent salary guide from the Nationals Careers Service shows the following salary range:
This, of course, is just a rough guide. I can advise you on what level of salary you should be looking for and the audit jobs which are currently available.
How to Become an external auditor
To be an external auditor requires an in-depth knowledge of accounting and financial reporting, and as such, professional qualifications would be seen as essential.
There would be an expectation to qualify as a chartered accountant with one of the following professional bodies:
- Association of Chartered Certified Accountants (ACCA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Association of International Accountants (AIA)
The usual route to qualify as a Chartered Accountant is to join an accountancy firm on a graduate training scheme. Taking an accountancy degree at university increases chances of being taken on by a firm, but graduates in any degree subjects are considered.
Another option for graduates is to apply to the three-year training scheme run by The National Audit Office. This route also offers the opportunity of a career in the public sector, auditing central government departments.
UCAS advises that graduates will need excellent maths, IT skills, good communication skills, and the ability to work with tact and diplomacy.
This mix of attributes is important. The maths skills incorporate enhanced attention to detail. When auditing complex financial statements, the smallest details can be crucial.
As an external auditor, you will be representing your firm. When on clients’ premises you will be meeting with directors and senior managers, as well as co-auditors. Positive people skills are mandatory to ensure a harmonious working experience.
You must also have an insatiable thirst for learning and knowledge. Accountancy software is always progressing and you need to be up to date on the latest guidelines adopted by the accounting regulatory bodies.
What does an external auditor actually do?
External auditors report primarily to the shareholders of the company. They need to be able to interpret the financial activities of the business, to ensure the business is operating legally as well as offer constructive recommendations.
The auditor collects, assesses, and interprets data to understand the financial activities of a business. As well as examining accounting records, the auditor will verify assets that the organisation has purchased and sold.
After a full and thorough investigation, the auditor submits a detailed financial report, where risks are identified and assessed. The auditor also checks whether the activity and reporting comply with accounting regulations.
The report will assess the financial position of the business, with attention to debts, assets, tax responsibilities, and payments. In the case where the auditor’s report is out of sync with the company’s own statements, further investigation is needed, to ensure it’s not misleading shareholders.
The auditors’ reports are placed in the public domain via the annual financial statements required to be filed in the UK with the Registrar of Companies.
How will an external auditor’s career develop?
As you start your career as an external auditor, you will most likely work as a part of an audit team. You’ll be learning the trade under supervision, or assigned straightforward, uncomplicated audits.
As you gain experience, you will gain more autonomy and take on more challenging audits. Audits of multinational concerns can involve travel and the development of experience in global trade.
Many auditors become specialised in niche sectors, either in a certain industry or particular aspects of audit, eg fraud. By doing so you can gain in-depth insights and valuable industry knowledge.
According to prospects.co.uk, promotion can be rapid. If you choose to remain within external audit upon qualification, you could become an audit manager within 2-3 years. From there you could move into senior manager and director positions, and eventually become a partner.
If you are in a Big 4 accountancy firm, there are clear and defined paths for development, although there are many advantages of working for smaller accountancy firms too.
The fact that external auditors have to see the bigger financial picture of a business, means they have transferable skills they can take into other aspects of accountancy. Auditors are able to transition to Financial Controllers, CFOs, or Group Reporting Specialists. However, there isn’t a necessity to move from audit to pursue a successful career.
Whether you intend to stay in an external audit or use it as a stepping stone, there is no doubt that is an excellent choice for someone starting out.
Each client you work with offers new challenges and experiences, and the learning curve is very steep. You won’t be stuck in your firm’s office, you are out and about, working hands-on with a variety of businesses and organisations.
And you’ll soon be used to nervous faces greeting your arrival on day one of a new audit.
Claire Jones is the Principal Consultant in the Accountancy Division at Harvey John.
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