What is external audit?

An external audit is an independent examination of the financial records prepared by an organisation. The main objective of an external audit is to verify that the accounting records for a company provide a true and accurate picture of the organisation’s finances and that statements are prepared in accordance to the set laws and accounting standards. External audits also add value by identifying areas where efficiency in the business can be improved and where controls and processes may be made more effective

What is an external audit professional and what do they do?

An external auditor is an independent, third party professional who performs an impartial review of the financial records of an organisation. They are responsible for examining their client’s accounts and financial statements, and preparing impartial reports of the findings, including any irregularities. They will typically report to an audit committee, consisting of senior management and provide improvement recommendations

External audits can also extend beyond financial audits - external auditors also provide assurance in other areas of the business or help companies address specific problems in areas such as health and safety, IT and social responsibility.

Key responsibilities

Main responsibilities include, but are not limited to:

  • planning and implementing audit procedures
  • attending meetings and interviewing staff to gather evidence
  • examining accounts and financial records and other relevant documentation
  • analysing and assessing financial reporting, fraud or operational business risks
  • preparing a final audit report, including making recommendations for improvements to systems or processes
  • discussing the conclusion and recommendations from the audit with clients.

Why are they important?

The independent role of an external auditor is important for reinforcing the credibility of a company’s financial statements and compliance with regulations. Auditors are also able to objectively evaluate the effectiveness of internal controls within the company.

Skills needed for this role

External auditors will need both strong analytical and interpersonal skills as well as sound judgement and commercial awareness. Excellent project management skills are also essential in order to plan and carry out audit activities and to meet deadlines.

Strategic Professional Options examinations linked to this role

Performance Management

Advanced Audit and Assurance

Career opportunities presented by this role

Opportunities for external auditors are widely available, and the role has an excellent reputation for providing variety and challenge. Professionals in this field are typically exposed to a range of businesses and industries on different audit projects. The audit role is considered an excellent grounding for accountants and many of the most senior finance professionals have worked in audit at some point in their career.

Competencies

High level competencies required by external auditors include:

  • Audit and assurance

    A. Advises on and communicates effectively the role and scope of audit and assurance engagements to relevant stakeholders.

    B. Applies regulatory, legal, professional and ethical standards relating to audit and assurance engagements.

    C. Plans and prepares for audit and assurance engagements.

    D. Performs effective audit, and assurance engagements.

    E. Reviews and reports on the findings of audit and assurance engagements.

    F. Guiding efficient and effective operations.

  • Corporate and business reporting

    A. Prepares financial statements, corporate financial and integrated reports for external stakeholders using appropriate technology.

    B. Leads effective decision making through analysing, evaluating and communicating performance and position of entities.

    C. Prepares financial statements for groups of entities using appropriate technologies.

    D. Monitors, critically evaluates, and advises on the relevant accounting standards, regulations, conceptual and financial reporting frameworks.

  • Data, digital and technology

    A. Identifies strategic options to add value, using data and technology.

    B. Analyses and evaluates data using appropriate technologies and tools.

    C. Applies technologies to visualise data clearly and effectively.

    D. Applies scepticism and ethical judgement to the use of data and data technology.

  • Governance, risk and control

    A. Evaluates organisational structures and governance to protect the long-term interests of stakeholders.

    B. Recommends appropriate strategies to ensure adherence to governance structures and application of best practice internal controls.

    C. Identifies and manages risk appropriately.

    D. Uses risk management for the best interests of an organisation and its stakeholders.

    E. Monitors and applies relevant legislation, policies and procedures.

  • Stakeholder relationship management

    A. Positively develops relationships with internal and external stakeholders.

    B. Communicates and gains commitment from internal and external stakeholder.

    C. Uses emerging technologies to collaborate and communicate effectively with stakeholders.

    D. Applies professional and ethical judgement when engaging with stakeholders.

    E. Aligns organisational strategic objectives with stakeholder needs and manages expectations.