Auditors assess the financial statements of companies, organizations and agencies to ensure they comply with relevant accounting standards. They document their investigations to provide evidence of compliance and accuracy. Finally, they report their findings and show supporting evidence to relevant decision-makers or regulators.
Though the auditing process is the same for all financial auditors, the purposes of internal and external auditing are different. External auditors verify the accuracy and completeness of financial reports for compliance purposes, while internal audits look at accounting and reporting processes and suggest improvements for accuracy and efficiency.
Businesses often hire third-party internal financial auditors to ensure they will meet external audit requirements and avoid regulatory problems. Audits can also help firms find ways to reduce operating costs and refine growth strategies. These professionals can perform less-formal compilations or reviews to offer insights without engaging in a formal auditing process.
Financial auditors have complex jobs requiring both technical skills and specific personality traits. Here is a look at the abilities auditors need to develop to perform their jobs effectively.
1. Critical thinking
The U.S. Defense Contract Audit Agency claims that critical thinking is essential in every step of the auditing process. Financial auditors need to decide which information is essential to their investigation and then objectively assess this data to find necessary information about accounting performance, compliance and other vital insights.
An internal auditor, for example, needs critical thinking skills to look at raw financial data and find inconsistencies. Instead of simply noting them and moving on, they then need the critical thinking abilities to use the data to trace the problem back to its root.
2. Communication skills
Internal auditors communicate with the decision-makers and stakeholders of the company or organization they are assessing. In addition to being able to express their findings verbally, they also need to be able to compile reports and visuals to convincingly convey their conclusions to company stakeholders. Also, all auditors must be able to defend their findings when questioned.
For example, an internal auditor presents the results of their investigation in writing with accompanying charts and graphs and must then verbally answer questions and provide additional insights to stakeholders and executives.
3. Analytical skills
Auditors need analytical skills to interpret the data and workflows they see and turn it into insights that can improve the processes of an organization. They glean such details from audit trails, which provide the information necessary for in-depth analysis.
An auditing professional can find an irregularity and then use their analytical skills to trace the issue back to its source using audit trails to assess the activities of each person and department in the company.
Auditing is a methodical process that requires the organization to manage huge amounts of financial data and analyze it step by step. Not only do auditors need to be consistently well-organized, they also need to know how to use tools that help maintain a precise workflow.
For example, an auditor needs a system that includes a cloud-based tool accessible from anywhere they might be conducting their assessment. Additionally, they need access to working papers that allow them to easily organize their findings to provide the framework and evidence for their final report.
The job of internal auditors is to find mistakes and inefficiencies and highlight them. Even if the ultimate goal of the auditing process is constructive, many employees see these professionals as outsiders whose job involves pointing out errors.
Therefore, empathy is an important quality. This trait will help auditors step into the shoes of those they are auditing. Auditors must find ways to engage them in a constructive and positive manner instead of merely pointing out problems and highlighting mistakes.
Auditors need the perseverance to complete their tasks when the financial data they have to work with is poorly organized and the employees or stakeholders are uncooperative. Internal and external auditors both must find ways past such difficulties to complete their assigned assessments.
Perseverance can be especially vital when a certain department expects a negative result from the audit and does not provide the necessary information or lacks the data the auditor needs to provide evidence for their findings. They need perseverance to move past these roadblocks and find the necessary information anyway.
By nature, auditors need to work independently. The insights they provide have to be completely unbiased and truthful. Functioning in this manner requires initiative. No one is there to tell an auditor how to perform their job or make sure they meet deadlines.
For example, an auditor has to have the initiative to pursue additional information to enhance their report. They must continue to seek the necessary data even if people within the company are reluctant to participate because they fear a negative outcome.
8. Business acumen
Financial auditors must be able to put their analysis in the context of the business and its industry. Internal auditors need business acumen to understand what information and insights are most constructive for their clients. Many of these clients actually prefer auditors with business acumen more than those with accountancy skills.
For example, if a manufacturing company hires a firm to perform an internal audit, the auditor will need to understand how the business operates in order to offer insights that can lead to actionable improvements.
An auditor’s job is to find misstatements and mistakes in financial records. As a result, they need to maintain a healthy sense of skepticism. The International Auditing and Assurance Standards Board identifies skepticism as one of the most important qualities for auditors.
This quality does not mean auditors should be automatically suspicious of every piece of financial data they see. Instead, they must assess its merits and entertain the possibility of a misstatement until they can verify the information.
10. Attention to detail
Companies and organizations trust internal auditors to find areas for improvement and compliance issues or accounting inaccuracies. Sometimes the errors or misstatements can be as seemingly insignificant as a single misplaced figure. Auditors need the ability to see these details alongside hundreds of other numbers and data points.
For example, a mistake in how a retailer records their sales tax can cause bookkeeping inaccuracies that affect the entire accounting process. An auditor needs to be able to spot this problem and warn the client before legal issues arise.
11. Mathematical skills
Like any finance-related career, financial auditors need math skills to ensure they can check calculations of accountants and analysts and make corrections on their own if necessary.
In addition to the basic math concepts necessary for adding and subtracting financial figures, auditors may need to perform certain types of mathematical modeling. For example, they may need to assess the level of risk for an external audit.
12. Accounting skills
Auditors check the work of accountants, so they need to be familiar with accounting concepts. In fact, many auditors start their careers with accounting degrees. In today’s accounting environment, accounting skill-sets also include knowledge of software tools.
For example, auditors need to assess the use of automated bookkeeping software or use an analytics tool to find inefficiencies in their client’s current processes. Further business-related insights might require the use of business intelligence (BI) software, which can provide a deeper look at the accounting and data collection processes a company uses for its financial record-keeping and reporting.