| Abstract | | | | all external auditors, however, the roles and |
| The auditing profession is | | | | responsibilities involved in each profession seem to |
| something that can involve many different kinds | | | | set a higher standard for external auditors. |
| of activities. These activities include protecting | | | | According to “employment |
| investors, organizations, and the economy as a | | | | of accountants and auditors is expected to grow |
| whole. There are very real dangers involved this | | | | by 18 percent between 2006 and 2016, which is |
| ever evolving profession. Fraud is most likely the | | | | faster than the average for all occupations. This |
| most obvious and most dangerous activity that | | | | occupation will have a very large number of new |
| auditors must detect. The second most | | | | jobs arise, almost 226,000 over the projections |
| dangerous is not doing their job well. External | | | | decade. An increase in the number of |
| auditors open themselves up to legal liability when | | | | businesses, changing financial laws, and corporate |
| they engage in audits, and not performing their | | | | governance regulations, and increased |
| job efficiently can be devastating. This article will | | | | accountability for protecting an organization’s |
| discuss these dangers, along with the roles and | | | | stakeholders will drive growth.” After taking |
| responsibilities of external and internal auditor, | | | | a glimpse at today’s economy, the previous |
| including the many career opportunities that come | | | | statement may not hold much truth, but it is |
| with these professions. | | | | undoubtedly accurate in that the accounting |
| | | | | profession will continue to grow, specifically |
| External and Internal Auditing: What’s the | | | | auditing. |
| Difference? | | | | The next statement, made by the |
| In order to compare and contrast | | | | same website, must be presented when |
| the roles and responsibilities of external and | | | | discussing career opportunities of auditors. |
| internal auditors, as well as discuss the vast | | | | “An increased need for accountants and |
| amount of career opportunities that comes with | | | | auditors also will arise from changes in legislation |
| becoming an external or internal auditor, we must | | | | related to taxes, financial reporting standards, |
| first define what they mean. The Institute of | | | | business investments, mergers, and other financial |
| Internal Auditors (IIA) describes an internal auditor | | | | events. As a result of accounting scandals at |
| as “one who performs an independent, | | | | several large corporations, Congress passed the |
| objective assurance and consulting activity | | | | Sarbanes-Oxley Act of 2002 in an effort to curb |
| designed to add value and improve an | | | | corporate accounting fraud. This legislation |
| organization’s operations. An internal auditor | | | | requires public companies to maintain |
| helps an organization accomplish its objectives by | | | | well-functioning internal controls to ensure the |
| bringing a systematic, disciplined approach to | | | | accuracy and reliability of their financial reporting. |
| evaluate and improve the effectiveness of risk | | | | It also holds the company’s chief executive |
| management, control, and governance | | | | personally responsible for falsely reporting financial |
| processes.” In contrast, an external auditor | | | | information.” |
| is defined as performing a periodic or specific | | | | The growth of the accounting |
| purpose audit to determine, among other things, | | | | industry as a whole is something that cannot be |
| whether the accounting records provided are | | | | overlooked. When considering the amount of |
| accurate and complete, prepared in accordance | | | | fraud that has occurred over the years, it is |
| with the provisions of GAAP, and examine | | | | impossible not to project an enormous need for |
| financial statements prepared from the accounts | | | | more auditors over the next decade. For |
| present fairly an organization’s financial | | | | example, the Bernie Madoff Ponzi scheme will |
| position, and the results of its financial | | | | require hours upon hours, days upon days, and |
| operations. Now that we know the difference | | | | months upon months to unravel the damage he |
| between what an external auditor does versus an | | | | and his “investment firm” has done. |
| internal auditor, we may begin to describe the | | | | There will be a countless number of external |
| roles and responsibilities each has in the accounting | | | | auditors working with the internal auditors from |
| field. | | | | his failed investment firm to find out what exactly |
| External auditors have a great | | | | happened, and to try and recover monies for the |
| influence on the audit of internal controls through | | | | duped investors. As another example is the |
| their audit activities, including conferring with | | | | Texas-based Stanford Investment Firm that is |
| management and their recommendations for | | | | now being investigated for also engaging in a Ponzi |
| improvement to internal controls. They provide | | | | scheme. This type of fraud is the most perilous |
| important feedback on the efficiency of the | | | | to investors due to its nature. |
| internal control system. Specifically, external | | | | Fraud and changes in law due to |
| auditors examine on a test basis, transactions and | | | | fraud are the main reasons of the enormous |
| records that support accompanying financial | | | | growth in the accounting industry, specifically |
| statements and the associated disclosures. They | | | | auditing. It is the personal responsibility of internal |
| review the accounting principles applied and | | | | and external auditors alike to actively investigate |
| considerable estimates made by management, | | | | for fraud in their organization or their client’s |
| and evaluate the overall presentation of an | | | | organization. To not be proactive in detecting |
| organization’s financial statements. Before an | | | | fraud is to only do half of their job. Auditors are |
| external auditor can conduct his responsibilities, | | | | required to analyze and interpret financial |
| however, they must comply with the generally | | | | statements, internal controls, and so much more, |
| accepted auditing standards. The most | | | | hence detecting fraud should be one of the |
| important being the independence the auditor | | | | requirements in any engagement or employment |
| must have in relation to the organizations he/she | | | | in an organization as an auditor. |
| is auditing, and attaining the adequate training and | | | | To emphasize the importance of |
| proficiency to perform an audit. | | | | detecting fraud, and its role in employment |
| Internal auditors, on the other | | | | opportunities, specifically for internal auditors, the |
| hand, evaluate and provide reasonable assurance | | | | following quote is taken from an article related to |
| of risk management and decide if internal control | | | | a study titled, “The Importance of Internal |
| systems are implemented as intended to allow | | | | Audit in Fraud Detection” by Paul Coram, Colin |
| the organization’s goals to be met. They | | | | Ferguson, and Robyn Moroney. “In recent |
| report on deficiencies in the internal controls, | | | | years the importance of good corporate |
| issues involving risk management, and provide | | | | governance has received significant public and |
| recommendations on how to improve in these | | | | regulatory attention. A crucial part of an |
| areas. Security is also an area of expertise an | | | | entity’s corporate governance is its internal |
| internal auditor may have when employed by an | | | | audit function. At the same time, there has been |
| organization. An internal auditor examines the | | | | significant public concern about the level of fraud |
| security involving sensitive information that must | | | | within organizations.” In their study, they |
| be kept inside the organization. Other | | | | “assess whether organizations with an internal |
| responsibilities include communicating with | | | | audit function are more likely to detect |
| management and external auditors, constantly | | | | fraud.” Their findings suggested that |
| continuing their education, and provide support to | | | | “internal audits add value through improving |
| an organization’s anti-fraud controls. | | | | the control and monitoring environments within |
| So far, the major differences | | | | organizations to detect fraud, and that keeping |
| between internal and external auditors are the | | | | the internal audit function within the organization is |
| amount of experience and expertise each holds. | | | | more effective than completely outsourcing that |
| Internal auditors seem to obtain knowledge | | | | function.” |
| specifically about the organizations to which they | | | | This study leads me to believe |
| are employed. This knowledge and experience | | | | that the roles, responsibilities, and career |
| may be carried with them from job to job, | | | | opportunities for internal and external auditors will |
| however, different organizations employ different | | | | expand at a rapid pace, and there is no reason to |
| accounting methods that could be tremendously | | | | think otherwise. With the amount of financial |
| different than that of the one they previously | | | | corruption throughout our society growing year |
| worked for. External auditors have specific | | | | after year, it is not incorrect to say that auditors, |
| guidelines and laws to abide by, which requires | | | | external and internal, are basically the financial |
| them to obtain vast amounts of knowledge of | | | | world’s police. Basically, auditing is going be a |
| many different types of accounting methods, | | | | depression-proof profession due to the nature of |
| controls, and more importantly, uncommon | | | | fraud, and the ever-expanding companies |
| entities and environments. | | | | worldwide. Hopefully accounting students looking |
| Upon discussing the roles and | | | | for a profession out of college look into becoming |
| responsibilities of external and internal auditors, we | | | | auditors, and continue to solidify the assumption |
| can bring to light the many career opportunities | | | | that they really can police the financial world |
| that are available to both professions. First, | | | | ethically and morally. |
| external auditors have an immeasurable | | | | In conclusion, external and internal |
| advantage over internal auditors when it comes | | | | auditors are the same in that they have an |
| to employment prospects. As stated earlier, | | | | extremely important job to protect investor’s |
| external auditors seem to have the knowledge | | | | life savings. They are different, however, in that |
| and expertise that can enable them to move | | | | external auditors should have a broader range of |
| from different accounting fields more easily than | | | | knowledge than do the internal auditors. |
| of an internal auditor. External auditors can | | | | Regardless, accounting a quite possibly one of the |
| become private CPA’s with less difficulty, | | | | greatest professions to enter into today, and |
| work as an internal auditor for a diverse amount | | | | auditing is only the tip of the “accounting |
| of organizations, and progress in a firm more | | | | iceberg”. |
| rapidly. These assumptions may not hold true to | | | | |