The definition developed by the Institute of Internal Auditors says, “internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.”
In other words, internal auditors add value to their organizations by helping them identify and evaluate risks. This information allows organizations to improve their risk management and control functions. Internal auditors work for the organization they’re auditing and report their findings to the organization’s management team.
While internal auditors can be seen as “police officers” of the organization, Phil Benevenuti, senior director of internal audit with Pegasystems, Inc. (a software company based in Cambridge, Mass), sees the role as more akin to a doctor.
“Even if you’re feeling well, you get a yearly checkup,” Benevenuti said.
Even healthy organizations can benefit from regular evaluations of the risks they face, as well as the processes and controls in place to mitigate them.
Who Are Internal Auditors?
While a certified public accountant (CPA) must direct the work performed by external auditors, internal auditors can come with a range of educational backgrounds. Many do have some accounting education because the internal audit function in many organizations contains a financial component.
Even if you don’t have an accounting background, a career in internal audit is still possible. The proliferation of regulations over the past fifteen to twenty years has increased the importance of compliance auditing, according to Benevenuti. In a previous role with an insurance company, Benevenuti hired a music major to audit the claims processing function. “She had worked in claims and knew how they were processed,” he said. “She also understood how the business worked and basic internal controls.” Auditors often come from diverse backgrounds.
Why Become an Internal Auditor?
Internal auditor roles offer good benefits both in the conventional sense and in opportunities for professional growth.
While no job is immune to layoffs, the growth rate predicted for auditors and accountants, including internal auditors, provides job security. The U.S. Department of Labor forecast a ten percent increase in job opportunities for accountants and auditors between 2016 and 2026, outpacing the 7 percent increase expected for all job types.
“Because internal auditors have to know and understand their businesses, they get a broader perspective of their organizations than people that go into other areas,” said Glenn Sumners, director of the Center for Internal Auditing at Louisiana State University.
Early access to top management is another benefit. Benevenuti was interacting with management while he was still in his early twenties. “My audits and recommendations could help shape the company much as a manager could,” he said.
Many internal auditors command decent salaries. The midpoint starting salary for an internal auditor with less than a year of experience is about $46,000, according to the 2019 Robert Half Salary Guide for Accounting and Finance Professionals. That increases to $71,000 for those with one to three years of experience, and $113,000 for internal audit managers.
Some travel typically goes with the job. Sumners says estimates that internal auditors travel 30 percent of the time, especially if the organization operates in multiple locations.
The Challenges of Internal Audit
Certain challenges come with the role of an internal auditor by its nature. There is some tension that comes with checking the work of others.
“It can be one of the most difficult roles in an organization,” Benevenuti says.
Internal auditors are required to maintain a level of professional skepticism, even with colleagues.
For example, a new auditor working for Benevenuti accepted a manager’s explanation for a transaction that deviated from the norm instead of gathering corroborating evidence such as emails from other employees. Valuing professional skepticism over mutual trust is crucial to performing a true audit.
Internal auditors often are the bearers of bad news. They’re the ones pointing out the risks in ideas that their colleagues support.
The constantly changing business world increases these challenges.
“We have to learn how to audit risks, processes, and technology that may not have existed six months or even a month ago,” Shine says.
For instance, robotic process automation (RPA)—using software robots to automate the work of humans, such as data entry—can save time and cost. However, a mistake in an RPA algorithm can reverberate across an organization, creating systemic errors.
Because so many types of organizations need internal auditors, it’s easy to find work in a subject that you’re passionate about. Many publicly traded companies, because they need to minimize the risk of misstating their financial performance, have internal audit functions.
Companies in heavily regulated industries, like financial services and health care, also tend to have strong internal audit functions. In these organizations, the regulations with which the company must comply often drive the audit function, Sumners says. In contrast, in less regulated industries, like retailing and manufacturing, internal audit typically is more focused on operational effectiveness.
While larger organizations may seem like a natural starting point when searching for an internal audit position, also consider smaller firms.
“Smaller audit shops often get overlooked, and yet they can offer just as exciting opportunities,” Shine says.
She adds that because QuikTrip is privately-held, the internal audit team has great flexibility to adapt its audit plan to address the most significant risks facing the business and to engage in consulting work.
How To Become an Internal Auditor
If you’re interested in a degree that’s directly relevant to internal auditing, consider schools that are part of the Internal Auditing Education Partnership. This program “prepares students with the skills and knowledge to help them conduct basic internal audits immediately upon hire,” according to the Internal Auditing Education Partnership Program (IAEP). IAEP programs teach an internal auditing curriculum within an undergraduate or graduate degree program that’s been endorsed by the Institute of Internal Auditors.