What is an external auditor and what do they do?
External auditors are responsible for determining the truth and fairness of an organisation’s financial statements and reporting this to the shareholders. These financial statements are also relied upon by investors, banks, customers and even employees as they represent an independent account of past financial performance and the organisation’s current financial position. They also include information about the way the entity is run and notes of future plans or threats.
An external auditor does not check every single transaction but rather targets the areas of risk which will vary from entity to entity and so requires a broad knowledge and understanding of many different operations. For example, the objective of a charity is not to make money, but this is often the objective of private entities and, therefore, the way they are set up and run is inherently different.
Given their privileged access to financial and other information across the whole entity, external auditors are well placed to include recommendations for improvements as a part of their work.
What are the different types of external auditor?
An external audit is a legal requirement for most organisations, but differences exist according to the size of organisation being audited: there are greater responsibilities for public listed companies compared to small businesses, which means that the external audit remit varies too. There are also specific guidelines for the way in which charity and public sector financial statements are prepared.
There are large audit firms (including the ‘big four’), medium sized firms (often still with international reach) and then a wide range including those with only a few partners. In simple terms, the larger firms are best placed to have the resources to audit the larger and more complex entities.
What qualifications are needed to become an external auditor?
For graduate entry, accounting and finance degrees are helpful in showing an interest in business but, traditionally, firms have recruited from a very diverse pool of candidates.
During your training you will need to obtain an accounting qualification from one of the recognised accounting bodies – the ICAEW (Institute of Chartered Accountants of England and Wales) or ACCA (Association of Chartered Certified Accountants), in England.
Depending on the range of work offered by the recruiting firm, some trainees move out of auditing work upon qualification, but others will carry on up the promotion ladder.
At the University of Law, we offer these courses to help you to become an External Auditor:
What skills do you need?
The key skill is to understand the entity you are auditing, so commercial awareness is essential, but also significant are:
- Interpersonal skills to build and develop relationships with a wide range of clients
- Communication skills are needed to convey complex information clearly, but also the critically important ability to ask good questions, to listen and to process information are of fundamental importance
- Organisational and time management skills, to complete audits and all required work in time for the company AGM
- Confidence and assertiveness to ask questions and demand answers – which may need to be challenged to get the information needed.
How do you become an external auditor in the UK?
The vast majority of those recruited into these roles are graduates, who secure roles with a variety of accountancy and business advisory firms. These recruiters, especially the larger ones, provide open days and structured work experience programmes which you could apply for if you are thinking of perusing this career.
How much do external auditors get paid?
Entry level salaries vary according to the size of employer and geographical region but can be anywhere from £18-28,000. Audit managers will typically earn £50-70,000 and audit partners will generally earn six figure salaries.
- ICAEW (Institute of Chartered Accountants of England and Wales)
- ACCA (Association of Chartered Certified Accountants)