What is an External Auditor?
External Auditors are third-party experts who conduct independent audits. An External Auditor examines a companies’ financial records and gives a report on their findings.
They are in charge of looking for mistakes and fraud in financial accounts, undertaking operational audits, reporting on findings, and making suggestions.
An External Audit is a procedure in which an impartial organisation evaluates a companys’ financial accounts. An external audit is performed in the majority of circumstances as a legal necessity. The distinction between an internal and external audit is the identification of the personnel performing the financial statement analysis. Internal audits are performed by employees within the company, while an external audit is implemented by an independent External Auditor.
The auditors engaged to carry out an external audit must be impartial, have the required professional credentials, and be chosen based on their reputation, experience auditing similar organisations, and the fee they will charge for carrying out the audit.
Due to the restricted time limits for any external audit, External Auditors will not be able to study every small element of the accounts they are reviewing, but will instead focus their attention on a carefully selected sample of outcomes, statistics, and transactions. Ideally, the audit should be viewed as a constructive procedure aimed to highlight the strengths and flaws of a companies’ operations, rather than as a test designed to detect wrongdoing.
To comprehend the ins and outs of the business, External Auditors typically specialise in a certain industry area, such as manufacturing, healthcare, real estate, construction, energy, or logistics.
External Auditors are not linked with a particular organisation. Instead, public accounting and auditing firms recruit them. Local, regional and national organisations use external auditors to keep an eye on businesses. External Auditors make up a large share of self-employed consultants that are compensated by the corporations they audit.
In order to assess the rigour of their external reporting as well as the robustness of their internal controls and corporate governance procedures, External Auditors have numerous responsibilities.
Some of them include:
- Visit customer sites and speak with all levels of management to have a better understanding of the company and its needs.
- Audit financial statements and analyse accounts for the correctness and regulatory compliance
- Inspect internal systems and controls
- Plan effective auditing procedures
- Conduct non-financial audits, such as health and safety and information technology
- Report systemic problems or fraud signs
- Evaluate risk management strategies
- Investigate particular concerns raised by regulatory agencies
- Explain audit results and provide recommendations
An average salary for an External Auditor in the UK ranges between £19,000 and £65,000 per year. This amount is determined by work location, a company that employs them, the industry for which they audit and experience.
Working hours and work location
Although the majority of External Auditors work full-time (37-39 hours per week), while some work more than 40 hours each week.
During busy seasons and to fulfil client deadlines, as an External Auditor you may be required to work longer hours. During the early years of your profession, you may also need to study for your professional tests in the evenings and on weekends.
Most External Auditors work in offices, while some work from home. Their profession requires them to travel on a regular basis to observe customers’ company processes firsthand.
Your education is the first step in becoming an External Auditor. Before entering the world of External Audit you must attend university or college and obtain a four-year accounting degree.
You will then need to earn a practice certificate and chartered accounting qualification from one of the professional bodies listed below:
- ICAEW (Institute of Chartered Accountants of England and Wales)
- ACCA (Association of Chartered Certified Accountants)
- ICAS (Institute of Chartered Accountants of Scotland)
- CAI (Chartered Accountants Ireland)
Based on your goals and interests, you may opt to become a Certified Public Accountant (CPA) . To do so, you must first have two years of experience as an accountant and pass a written test. To become a CPA, you must undergo continued professional development and adhere to a code of ethics.
Here are some common skills and attributes that are included in a External Auditor role
must have skills:
Knowledge of the External Audit Process, including:
- Knowledge of the elements of financial statements
- Understanding accrual accounting
- Computer system knowledge
- Understanding journal entries
- Expertise in legal compliance standards
- Knowledge of double-entry accounting
- Familiarity with a variety of audit/accounting tools
- Communication and Interpersonal Skills-Client communications will make up the majority of your day-to-day job as an External Auditor. You’ll interact with a variety of people, so having solid people skills will come in handy.
- Constant Professional Development- Participate in professional training and upskilling programs whenever feasible. It is critical that you engage in activities that encourage continual learning and growth on a regular basis. In this manner, you can be certain that you are continually learning new things, even if you do not have professional audit experience.
- Attention to Detail and Problem-Solving Skills – It goes without saying that an ambitious External Auditor must have problem-solving abilities as well as a penchant for statistics. You must have professional scepticism, organisational skills, and great attention to detail in addition to understanding how to write compliance and analytical risk reports.
- Independence, Assertiveness and Objectivity- Shareholders and other stakeholders in the firm value the auditor’s judgement. It is your obligation as an External Auditor to report any concerns discovered in a company’s risk management or internal control, as well as your suggestions for improvement.
- Critical Thinking- As an External Auditor, you will continually strive to determine whether the ideas, arguments, and findings accurately portray the whole picture while detecting, assessing, and resolving concerns by deducing implications from what you already know and using the information you have gathered.
- Time management- As an External Auditor, you must be able to manage deadlines by prioritising the work that is assigned.
- Proposal and Report writing skills- External Auditor needs the ability to record business reports and plans for the company or project following the policies and procedures of the company.
Apart from the type of company that employs you for their External Audit, your workday will greatly be influenced by the type of external auditing that you are performing.
External Auditors work in two areas of audit:
- Financial Audit- A financial audit, often known as a financial statement audit, is a thorough examination of your business’s financial statements. They are normally carried out once a year. While financial audits can be performed internally (by an employee), most of your stakeholders will prefer an audit completed by a third party, External Auditor. A financial audit’s ultimate goal is to guarantee that your financial records accurately reflect your organisation’s financial performance.
- Non-financial Audit (Corporate Audit): During a Corporate Audit, non-financial data is examined to offer assurance in non-financial areas or to assist a corporation in addressing specific issues. The scope of this task is extensive, and it will be determined by the client’s demands and the auditing firm’s services.
The following types of companies in the UK are obligated by law to perform yearly external audits:
- An authorised professional firm
- A BIPRU investment firm
- An insurance intermediary
- A mortgage intermediary
- A mortgage lender
- A mortgage administrator
- An investment management firm
- A personal investment firm
- A securities and futures firm
- A service company
In order to expand on your experience as an External Auditor you may contact companies and inquire about internship options.
The career path in External Auditing may take you in numerous directions and you are probably asking yourself What Can You Do with an MBA in Banking and Finance?. External Auditing could be the right career path for you.
Working in External Auditing may be a very rewarding profession. It capitalises on your numeracy, relationship management and communication skills, as well as your grasp of finance and business; all of which give a solid basis for the advancement of your audit career.
The issue is, where will your career in External Auditing take you?
In terms of the size of the business for which you work, there are advantages and disadvantages to working for a large multinational or a smaller corporation.
A large company will provide diversity and exposure to enable you to truly discover your position in External Audit, but a smaller company may reward you with greater recognition for your work in a more trusted advisor role.
Smaller organisations, on the other hand, will not provide you access to bigger, more sophisticated engagements, which means that a huge multinational would be unlikely to hire you as Group Controller, for example, because you would lack expertise with consolidation of several entities.
Traditionally, it is easier to transfer from a large company to a smaller business than the other way around. The main thing is to pick the path that you believe would best benefit your career in external auditing and provide you with the most opportunities to use your talents while matching your personality and work style.
As a skilled External Auditor, you may advance to management and eventually become a partner or financial director. You may even start your own accounting firm. You could also use your expertise of administration and accounting to work in procurement or another office department.
This is a full-time curriculum, delivered by the University of the West of Scotland London. To accommodate their schedules, students can choose from a variety of start dates. UWS London provides their students with the opportunity to learn from industry experts and guest lecturers, as well as professionals with years of experience. The best thing about this course is that it is held at the London Campus, in the very heart of the UKs business capital.