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How to get started in auditing

Rewarding career requires an eye for detail, a healthy dose of professional scepticism and an emphasis on people and communication

Auditors review businesses’ accounts and financial statements with the purpose of expressing an opinion as to whether they are true and fair, and presented in conformity with the relevant accounting rules and principles.

Internal vs external

There are several key differences between an internal and external audit.

The first is the level of independence. An external audit is conducted by an independent third party, while an internal audit is often conducted by the company's own employees or internal audit department, sometimes with independent outside assistance.

Another difference is the scope of the assessment. External audits are focused on financial information and records, and are usually limited to a specific period of time, e.g. a year. Internal audits, on the other hand, are focused on the company's overall operations and processes, and they can cover a wide range of topics, such as compliance, risk management, technology and systems, and human resources.

A third difference is the level of detail in the assessment. External audits are usually more detailed and in-depth than internal audits, as they are required to provide assurance to stakeholders that the company's financial statements are accurate and compliant with relevant laws and regulations. Internal audits, on the other hand, are more focused on identifying potential risks and opportunities for improvement in the company's operations.

	External audit	Internal audit
Reports to	Shareholders or members who are outside the organisation’s governance structure.	The board and senior management who are within the organisation’s governance structure.
Objectives	Add credibility and reliability to financial reports from the organisation to its stakeholders by giving opinion on the report.	Evaluate and improve the effectiveness of governance, risk management and control processes.
Coverage	Financial reports, financial reporting risks.	All categories of risk and their management, including reporting on them.
Responsibility for improvement	None. However, there is a duty to report problems.	Improvement is fundamental to the purpose of internal auditing. But it is done by advising, coaching and facilitating in order to avoid undermining management.

Key skills

“You need very good analytical skills. You need to be able to look at certain figures in the accounts and ask questions as to why certain things are the way they are,” explains Steve Collings, audit and technical partner at Manchester firm Leavitt Walmsley. However, more important than that is a deep knowledge of accounting standards, he adds. “If you don’t know the technical content of financial instrument sections, how are you going to audit that? How are you going to know that the client has accounted for a financial instrument properly?”

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Finally, he notes, a good understanding of double-entry bookkeeping is extremely important for auditors, particularly if they are investigating a discrepancy. This, he says, puts AAT students at an advantage over those who have entered the profession through other routes.

“What you find is that those accountants that haven’t done qualifications like AAT, who have perhaps done a degree route and then gone straight on to a chartered qualification, usually do not have the basic double entry. AAT does start right from the beginning, covering what credits and debits are. That is a skill that I use to this day because, particularly in auditing, you might have to unravel something to get to the bottom of it and understand it.”

TOP TIPS

Steve Collings’ vital skills for auditors

Analytical skills

Knowledge of accounting standards

Double-entry bookkeeping

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How do I get into auditing?

The primary route into external auditing is by working directly for a firm that conducts audit work and qualifying that way. AAT members will need to add an additional qualification and become chartered to qualify as an external auditor. Additional pathways include apprenticeships and training through professional bodies such as ACCA or ICAEW, which you can do once you have completed your AAT qualifications.

When it comes to internal auditing, students can qualify through AAT. Again, this can be achieved via a variety of methods, such as apprenticeships, direct application, training with AAT and becoming an AAT Licensed Accountant for internal auditing.

However, it’s important for AAT members who have aspirations of becoming a practitioner to make sure they have a full understanding of what the chartered bodies’ rules are if that’s a route they are considering.

“Just because you have an AAT licence, doesn't mean that you can still practice and be a student member of a chartered accountancy body,” explains Collings.

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