Accounting

EXTERNAL AUDITING

There are two types of auditors – internal and external. External auditors are often accountants at the top of their field. They usually hold a CPA, or Certified Public Accountant, certificate in the United States. This certification is called different things in different countries, but there is usually a special category for accountants who have not only met the educational requirements, but also have passed some sort of government-sponsored examination. The CPA exam is given by each state and is considered one of the most difficult professional certifications to obtain.

CPAs have an obligation to the stockholders of the client company to certify the accounting statements of their publicly held clients as required by the SEC. This involves delving deeply into the accounting records of the company, assuring that the financial statements are accurately stated. Increasingly it also involves studying the internal controls of the company in order to assure stockholders that operations are lawful and set up as much as possible to avoid possible misuse or theft of company resources. In this role they work closely with client personnel, examining ways to improve security in their everyday processes.

In order to do this, an accountant needs to familiarize him or herself with the industry of the client. Often public accountants find an industry that interests them and suits their skill and knowledge levels. For this reason it is often a starting point for young accountants just graduating from college. They can gain valuable experience by working in several industries and choosing a career path from there.

Public accounting and auditing can often take a toll on an accountant. Often there is lots of travel and very long hours. Family concerns can take precedence, making accountants leave public accounting after just a few years. Many of them take their auditing experience to other companies by becoming Internal Auditors.

INTERNAL AUDITING

Internal auditors have a slightly different focus. They, too, report to the stockholders, although in this case, they are employees of the company. Unlike External Auditors, Internal Auditors are not concerned with certification of financial statements. But they are involved in setting up, maintaining and policing the company’s system of Internal Controls.

Internal Auditors are often involved in studying the accounting around various transactions and processes within their company. However, their job is far more extensive than that and those duties may vary from company to company. In most companies they are responsible for assuring that whatever department, division, or location they are auditing is complying with all the rules, regulations and written procedures set up by the company. They report any discrepancies between actual procedures and prescribed procedures along with their recommendations for improvement to the Audit Committee of the Board of Directors.

Law requires external audits for any publicly held company in the United States. Any large company, even if privately held, generally hires public accountants to make sure their accounting methods are in line with current standards. Internal Auditors are not required by law, but usually are required in the company’s charter. Both serve and protect the company owners’ interests.