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I just want to share some of my experiences in public audit, corporate accounting and internal audit during the years, in case some new comers need it. Questions and healthy discussions are very welcome. Nonsense discussions about whether corporate accounting is hard or not, how much money can certain functions make, and if certain function is good or not will not be taken, because before you want to talk about something, you should at least know and understand it, or you can just try to watch, read and learn before you want to speak up, also, the answer will depend on personal situations, there will never be black and white answer for those questions many people love to discuss and waste a lot of time.

What is internal audit?
Internal audit is the internal control function in a company, which is a pretty independent and separate from corporate finance and accounting. With SEC strengthening the internal controls of public corporations in the SOX (Sarbanes-Oxley Act, mainly 404 and 302) environment, internal audit is more and more important in the US corporate world.

Internal audit is considered the ears and eyes of the top management to find potential issues in finance and operation, and further improve the internal control. Thinking about big company operating globally, without internal audit, sometimes it is really hard to find out what joint ventures, branches or plants in remote foreign countries are doing.

What do internal auditors do?
The working style of internal auditors is to drill down from the appearance, up to the deepest levels that drive the appearance, that is to say, internal auditors not only care for the financial statements, all the balances on the statements, also more focus on the deeper processes affecting those figures. For example, the purchasing process: how to place and approve PO (Purchase Order), how is the PO module set up, how does the PO module interact with other modules, how is PO managed, especially open PO and blanket PO, how are goods received, and how the A/P balance is finally shown in the S/L and G/L, and finally get paid through three-way (or two-way, four-way) match. Every point in the whole process directly or indirectly affects the final A/P balance, which presents the liquidity quality of a company. My point here is unless with relatively deep and comprehensive understanding of the whole process, the internal audit will not be done well and valuable observations and conclusions will not be made.

Just with this kind of nature, internal auditors are in a very good position to learn the company, the operation and business. Internal auditors have the rights to ask questions, which sometimes look “silly and superficial” to other people. But once different points and sub-processes of the whole process are weaved together, internal auditors are in a higher position to look at the whole picture, and can easily find weaknesses that were overlooked by people actually doing the job due to the lack of whole picture, and correspondingly improve or strengthen them. Also, internal auditors have the opportunity to deal with different levels of people in a company, form workers on the floor, staff in purchasing/sales, managers of different functions, controllers, CFOs of business groups and business units, up to the top management of the company. This kind of experience is invaluable. A lot can be learned from listening to what these people say and watching what they do.

Internal control review is not the only thing internal auditors do. Internal auditors can do and see many things other functions/departments have no rights to do and review and only have limited exposure, so internal auditors can team up with other departments to do some special projects, which can further enlarge the exposures and experiences of internal auditors.

What capabilities/skills should good internal auditors possess?
Good internal auditors should have excellent accounting and finance background, which can either be learned form school or self-studied in work. I agree that school is not the only way to learn accounting/finance. But I firmly believe from my personal experience that whatever channel accounting/finance will be learned, the solid knowledge in accounting/finance is one key to do a good job in internal audit and to progress in the career path. I don’t want to comment on if accounting/finance is hard or not, I can only say that on the one hand, solid theory knowledge is necessary and needs years of hard study and thinking to possess, on the other hand, how to use the knowledge in the real world is even harder, which needs years of working experiences to handle it well.

Also the comprehensive understanding of operation processes is necessary in internal audit world, which can only be obtained through doing different sections in different projects. Talking from my experiences both in internal audit and one of big four, I must say that internal audit can gain a much deeper and wider perspective of company’s operations than public audit.

Last but not the least, the importance of communication capability can never be exaggerated in internal audit. Without good communication, it is hard to talk to people to get info, understand other people’s concerns to build rapport, present points in an articulate and concise way, and deal with tough people in tough situations, which is very common in internal audit.

Generally, the skill sets for internal auditors are never single. They are a bunch of skills together, which lay a very solid ground for the future career path.

why not chinese?

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一个中文字也没有

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good essay, and appears that you have a concise thought over the audit. besides your impressive idea about accounting, i want to know whether you have idea about Sox which has been the headlines for auditors?

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