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What does an Internal Auditor do?

By Victoria Blackburn
Updated Mar 02, 2024
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Most businesses engage external auditors to review the work done by their employees and check for errors, oversights or irregularities. An internal auditor is a person employed by a business to do the same thing. The difference is that while the external auditor has many clients and does this work for a fee, the auditor is an employee and works within the business alongside other employees. This is an important role, as it is often the auditor who first identifies poor work quality, waste of time and materials, fraud, theft and deliberate acts of industrial sabotage.

The standard method for conducting an audit is to examine a transaction or process, compare how it was done with the way it is documented in an operating procedure or accounting convention and report to management on any differences. The internal auditor uses a range of methods to capture information, and often will have to design one-off analysis tools, or at the very least adapt an existing tool, to keep track of the information being reviewed. Spreadsheets, tables, graphs and run sheets are just some of the tools used to record information on which the final report is built.

This information is vital to management’s ability to run a successful business and continue to provide employment and value to the community. The internal auditor is responsible for reporting in a factual, objective manner, free from emotion or conjecture. It is up to management to decide the action needed, although recommendations can be made in the audit report.

Most employees do not set out to make deliberate mistakes, and often, issues identified in the audit are minor and easy to rectify. In cases where processes are more complex, errors can occur when there is a high turnover of staff and lack of attention to training new people. An internal auditor can identify that by looking at the data and talking to the employees.

The person in this role walks a fine line between management and the other employees. On the one hand, the internal auditor is an employee, and is therefore expected to serve the organization. On the other hand, the auditor is also an employee, and needs to be able to form sound working relationships with other employees. A good internal auditor needs an inquiring mind, the ability to interact with different types of people, a thorough understanding of work processes and how they are documented and the skills to prepare and present management reports.

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Discussion Comments
By nony — On Jun 19, 2011

@allenJo - I haven't asked him, but my understanding is that it's from 40K to 60K depending on years of experience, and of course, the size of the company doing the hiring. Fortune 500 businesses are definitely the best.

By allenJo — On Jun 17, 2011

@nony - I don’t expect that you would ask your friend this question, but do you know the range for an internal auditor salary?

By nony — On Jun 14, 2011

@NathanG - Those are legitimate points, but that’s why the auditor works in his own domain. Furthermore, if he is a certified internal auditor, he realizes that taking shortcuts of any kind will only blow up in his face in the end. My brother’s friend is a certified internal auditor and he had to pass an exam and subscribe to a code of ethics.

He works for a Fortune 500 company and he is good at what he does. I can’t imagine that he would ever compromise his work for fear that his findings might rub some other employees the wrong way.

The fact is that he is very much in demand for his skills and the results he delivers; if in a worst case scenario he loses his job, there are other companies who will be happy to hire him.

By NathanG — On Jun 12, 2011

@strawCake - That's a good point. I think one of the challenges for an auditor internal to the company, rather than someone completely external, would be what kinds of changes they would recommend to remedy problems they uncover.

For example, would they recommend sweeping changes-like a complete revision of a particular procedure, for example-or just minor tweaks around the edges?

An external auditor would face no such hurdles. If an entire process needs to be thrown out, he will recommend that it be done. An internal auditor knows, however, that there are people and egos associated with those processes; some of these people may be close colleagues.

Therefore he might be tempted to suggest only slight revisions to cover both bases: protect his relationships with his fellow-workers, while hinting that changes do indeed need to be made. This is less than an ideal situation.

By strawCake — On Jun 12, 2011

@Monika - Being an internal auditor does sound like a very difficult job. Internal audits are necessary though so I'm glad someone is willing to do it!

The company I work for performed an internal audit a few months back and discovered some pretty serious fraud. It was costing the company a ton of money that could have been used for marketing or something else productive.

Everyone at the company was pretty happy with the internal auditor for uncovering the fraud. Except the people who were committing the fraud obviously.

By Monika — On Jun 12, 2011

This seems like it would be a really stressful job. I imagine it would be difficult to have an internal auditor job and maintain relationships with the other employees.

The nature of this job just seems like it would set the auditor apart from their coworkers. Even if the auditor has a great personality the other employees still know the auditor is looking over their shoulder, checking for mistakes and fraud.

Also if the auditor forms a close relationship with the other employees it would probably make it more difficult and awkward for the auditor. Imagine reporting to your boss that your best work friend made a horrible mistake or is committing fraud. I don't know if I could do it!

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