How to Be External Auditor - Job Description, Skills, and Interview Questions

Mar 4, 2020   /   5 Minutes Read   /   By Albert
  • How to Become
  • Job Descriptions
  • Skill & Competencies
  • Interview Questions
  • Common Tools
  • Professional Organizations
  • FAQ
  • Links

    • The external auditor is an important entity when it comes to ensuring the accuracy and reliability of an organization's financial statements. If an organization fails to hire an external auditor, it can have serious ramifications. The lack of an external audit increases the risk of fraud or misstatement of account balances, which can lead to a lack of confidence in the company’s financial position and the potential for investors to lose money.

    Furthermore, it can lead to legal action or penalties if the financial statements are found to be inaccurate. On the other hand, hiring an external auditor provides assurance to stakeholders that the financial statements are accurate and reliable, and provides a sense of security in the financial position of the organization.

    Steps How to Become

    1. Earn a Bachelor’s Degree. The first step to becoming an external auditor is to earn a bachelor's degree in accounting or a related field. Most employers prefer candidates with a degree in accounting, finance, or business administration. It is important to choose a program that is accredited by the Association to Advance Collegiate Schools of Business (AACSB).
    2. Obtain Certification. Many employers prefer or require external auditors to obtain professional certification. Certifications include Certified Public Accountant (CPA), Certified Internal Auditor (CIA), and Certified Fraud Examiner (CFE). To become certified, you must meet educational requirements, pass an exam, and meet certain experience requirements.
    3. Gain Experience. Once you have a bachelor's degree and certification, you must gain experience in auditing. Most employers require at least two years of experience in auditing. This experience can be gained through internships with public accounting firms or through full-time employment.
    4. Obtain Professional Membership. Most employers require external auditors to be members of professional organizations such as the Institute of Internal Auditors (IIA) and the American Institute of Certified Public Accountants (AICPA). This membership demonstrates a commitment to the profession and helps keep auditors up-to-date on changes in the industry.
    5. Pass the Exam. In order to become an external auditor, you must pass the Uniform CPA Examination. This exam is administered by the AICPA and tests your knowledge of auditing, financial reporting, taxation, and other accounting topics.

    The key to staying ahead and capable in the auditor profession is to ensure that you are constantly expanding your knowledge base and keeping up to date with best practices and industry trends. Staying current and knowledgeable requires continual training and practice so that you can apply the newest techniques when conducting an audit. it is important to maintain strong communication skills, as effective communication is essential to building strong relationships with clients and colleagues.

    Furthermore, it is also essential to stay organized and efficient in order to complete audits in a timely manner. Taking the time to develop these skills and abilities will help auditors remain ahead of the curve and stay capable in their profession.

    You may want to check Information Systems Auditor, Business Process Auditor, and Accounts Auditor for alternative.

    Job Description

    1. Develop and execute internal audit plans to evaluate the adequacy, effectiveness and efficiency of the organization’s operations and systems of internal control.
    2. Prepare audit programs and audit reports that communicate the results of the audit, including findings, conclusions, and recommendations.
    3. Identify areas for improvement in the organization’s policies, procedures, and processes.
    4. Evaluate internal controls for accuracy, reliability, and compliance with applicable laws, regulations and professional standards.
    5. Communicate audit findings to management and make recommendations to strengthen internal controls.
    6. Monitor corrective action plans implemented by management to ensure they are effective and address audit recommendations.
    7. Maintain knowledge of current developments in accounting and auditing standards.
    8. Prepare financial statement audit reports in accordance with Generally Accepted Auditing Standards (GAAS).
    9. Ensure that all external audit activities are performed in accordance with professional standards and applicable laws and regulations.
    10. Assist with external financial audits by providing necessary documents and information to auditors.

    Skills and Competencies to Have

    1. Strong financial and accounting knowledge
    2. Excellent analytical, problem-solving, and communication skills
    3. Ability to interpret and understand complex financial data
    4. Experience in auditing financial statements and other financial reports
    5. Knowledge of Generally Accepted Auditing Standards (GAAS)
    6. Proficient in using specialized auditing software/tools
    7. Understanding of internal controls and risk management systems
    8. Ability to assess the reliability and accuracy of financial records
    9. Knowledge of applicable laws, regulations, and professional standards
    10. Ability to meet deadlines and handle multiple tasks simultaneously
    11. Excellent time management and organizational skills
    12. Ability to work independently and in a team environment

    An external auditor is an important position that requires a variety of skills. Chief among them is the ability to think analytically, as a successful auditor must be able to understand complex financial information and identify potential problems. Critical thinking is also important, as external auditors regularly evaluate financial data and determine the accuracy of reports.

    Having a strong knowledge of accounting principles and regulations is also necessary, as auditors must be able to apply these rules in their work. In addition, strong communication and interpersonal skills are essential for building relationships with clients and colleagues. the combination of these skills enables external auditors to provide reliable assessments of financial statements, which is key for ensuring the accuracy of financial records.

    Compliance Auditor, Senior Inventory Auditor, and Senior Health Care Compliance Auditor are related jobs you may like.

    Frequent Interview Questions

    • What experience do you have in external auditing?
    • What challenges have you faced when auditing a company?
    • How do you stay up to date with changes in accounting standards and regulations?
    • Tell me about a time when you had to investigate a discrepancy in a company’s financial records.
    • Describe a situation where you had to identify and address a potential problem before it became an issue.
    • What strategies do you use to evaluate the effectiveness of internal controls?
    • How do you ensure accuracy and compliance when preparing financial statements?
    • What methods do you use to mitigate risk during an audit?
    • What is your approach to evaluating management’s assertions during an audit?
    • Describe a time when you successfully identified fraud in a company’s financial documents.

    Common Tools in Industry

    1. Financial Auditing Software. A software application used to automate the financial auditing process. (Eg: Xero)
    2. Compliance Tools. Tools that help organizations monitor and audit their compliance with laws and regulations. (Eg: ComplianceForge)
    3. Data Analytics Tools. Powerful tools used to process, analyze and report on large amounts of data. (Eg: Tableau)
    4. Document Management Systems. Software that helps organizations store, manage and track documents. (Eg: SharePoint)
    5. Internal Control Evaluation Tools. Software that helps organizations to evaluate and monitor their internal control mechanisms. (Eg: Process Weaver)
    6. Risk Management Software. Software that helps organizations identify, assess, monitor, and manage risks. (Eg: RiskLens)
    7. Audit Management Software. Software that helps organizations manage the entire audit process from planning to reporting. (Eg: ACL GRC)

    Professional Organizations to Know

    1. Institute of Internal Auditors (IIA)
    2. American Institute of Certified Public Accountants (AICPA)
    3. Association of Certified Fraud Examiners (ACFE)
    4. Institute of Management Accountants (IMA)
    5. Chartered Institute of Public Finance and Accountancy (CIPFA)
    6. The Institute of Chartered Accountants in England and Wales (ICAEW)
    7. Association of Government Accountants (AGA)
    8. Association of Chartered Certified Accountants (ACCA)
    9. Global Internal Audit Common Body of Knowledge (CIABok)
    10. International Federation of Accountants (IFAC)

    We also have Operational Risk Management Auditor, Information Security Auditor, and Payroll Auditor jobs reports.

    Common Important Terms

    1. Internal Auditor. A person or team of people employed by a company or organization to review and analyze the financial records and operations of the organization.
    2. External Auditor. An independent professional person or firm appointed by the shareholders of a company to carry out an audit of its accounts.
    3. Financial Statement Audit. A comprehensive review of a company’s financial statements, including its balance sheet, income statement and cash flow statement, to ensure accuracy and compliance with applicable laws and regulations.
    4. Generally Accepted Accounting Principles (GAAP). A set of accounting principles, standards and procedures issued by the Financial Accounting Standards Board (FASB) that all publicly traded companies must follow in order to report financial information.
    5. Sarbanes-Oxley Act (SOX). A U. S. law passed in 2002 that imposed stricter regulations on publicly traded companies in order to improve accounting transparency and reduce corporate fraud.
    6. Risk Assessment. An analysis of the potential risks and consequences associated with a particular course of action or decision.
    7. Fraud Examination. The process of investigating allegations or evidence of fraud, including identifying fraudulent activities and determining the amount of loss incurred as a result.

    Frequently Asked Questions

    What is the role of an External Auditor?

    An External Auditor is an independent professional who reviews an organization's financial records to ensure accuracy and compliance with applicable laws and regulations.

    Who hires the External Auditor?

    An External Auditor is typically hired by the organization's Board of Directors.

    What type of audit does an External Auditor perform?

    An External Auditor typically performs a financial audit, which involves evaluating the organization's financial statements to ensure accuracy and compliance with applicable laws and regulations.

    What is the goal of an External Audit?

    The goal of an External Audit is to provide assurance that the organization's financial statements are accurate and compliant with applicable laws and regulations.

    How often should an External Audit be conducted?

    The frequency of an External Audit will depend on the size and complexity of the organization, but typically it should be conducted at least annually or as required by law.

    Web Resources

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