Reprinted from Internal Auditor, June 2003
Internal auditing's importance to strong corporate governance has never been more apparent. Auditors can take advantage of their newfound popularity to chart a path to career success.
By Lynn Koller
IF POWER REALLY IS AN APHRODISIAC, internal auditors may find their sex appeal on the rise; relatively speaking, at least. The Sarbanes-Oxley Act of 2002 has increased not only the need for internal auditors, but also their stature in the eyes of those who hire them as well as those who aspire to be them.
"The internal auditor's role is increasing dramatically," says Karl Nagel, a principal of Karl Nagel & Co., an accounting firm based in Huntington Beach, Calif. "Although internal auditors never just looked at financial information, it was typically a priority at many firms. Now, they have a much higher responsibility: Sarbanes-Oxley compliance. Executives are depending on internal auditors not just to reduce the cost of outside auditors, but also to help the executives sleep easier at night."
Although prospective auditors face a tight job market, experienced auditors may soon see wider career options available to them. In a recent IIA Global Auditing Information Network survey of 243 chief audit executives, 44.4 percent of respondents stated that their internal audit staffs would grow in 2003. Auditors with two to four years' experience, specialized knowledge, and adequate technical skills stand a good chance of finding employment under current conditions.
Make Yourself Marketable
Although the demand for internal auditors varies around the world, experienced and beginning auditors with specialized knowledge may have a better chance of obtaining employment. Regulatory or technological specialties as well as professional accreditation and industry-specific experience can increase an auditor's market value.
SARBANES-OXLEY EXPERTISE Internal auditors who have comprehensive knowledge of Sarbanes-Oxley and U.S. Securities and Exchange Commission (SEC) rules may find themselves a hot commodity, says Robert Hirth, managing director of Protiviti, an international risk consulting and internal audit firm that employs about 800 audit professionals. He suggests that internal auditors specialize to take advantage of the risk-sensitive corporate environment.
The complexity of Sarbanes-Oxley makes it challenging for organizations to assimilate, and Hirth suggests that internal auditors take advantage of that need. "Sarbanes-Oxley never existed before," he explains. "No matter who you are — with 20 years of experience or two — this is a brand new thing that you can become as expert about as anyone. Of course, general business experience and an understanding of internal controls, financial reporting, and documentation are very important."
Glen Gray, a professor of accounting and information systems at California State University at Northridge, says he recently spoke with an internal auditor at a large insurance company about how Sarbanes-Oxley was impacting his department. "Before Sarbanes-Oxley, he had reason to believe that his entire internal audit department was going to be eliminated," Gray recounts. "Auditors were being laid off, morale was down, and the chief auditor reported to the controller.
"Now, after Sarbanes-Oxley, the department is growing again, morale is up, and the audit department is reporting directly to the audit committee," Gray continues. "The reason for those changes is that Sarbanes-Oxley places a renewed emphasis on internal controls, as well as the requirements for the chief executive officer and chief financial officer to certify quarterly and annual financial reports."
TECHNOLOGY KNOWLEDGE Like regulatory expertise, having knowledge of the risks, benefits, and practical issues surrounding the latest technologies can make an auditor marketable. "Technology is a very important part of internal auditing, so we're looking for people with specific skills," Hirth says.
"As the actual technology and applications that a company uses change, the risks change and how you audit changes, as well," he explains. New enterprise- resource planning and customer-resource management applications have changed how companies function and the risks they face. Securing access to company data, safeguarding data when an employee leaves a company, and protecting Internet transactions are examples of issues now important to auditing.
Conversely, companies with older applications sometimes face a scarcity of auditors with applicable knowledge, Hirth says. This may help veteran or semiretired auditors looking for an edge in the job market.
Ultimately, auditors with a specialty can capitalize on changes in the market, Hirth adds. Other areas of specialization include security, privacy, and specific applications.
Glenn Sumners, director of the Center for Internal Auditing at Louisiana State University (LSU), warns, however, that although many internal auditors may see an increased demand for specific information technology (IT) skills, they may also see more applicants jockeying for their positions. "The demand now is not quite as good as it was a few years ago for IT auditors," Sumners explains. "But, the market will be good in the long run."
INDUSTRY EXPERIENCE According to Hirth, Protiviti looks for industry-specific backgrounds. For example, the company has hired bank regulators and certified fraud examiners with legal backgrounds. The divergence of job duties within companies of all sizes means that other employment experience can be adapted for auditing.
Protiviti once hired a Boeing engineer. "You wouldn't necessarily think of him for auditing," Hirth says. "This was a person trained in a very process-oriented world … and when we got into a manufacturing environment, he was a lot better than a person with an accounting degree."
To compensate for his lack of financial background, the employee was sent to an intensive six-week accounting program. "We had this engineer who was now 'dangerous' because he had some accounting," Hirth says. The engineer-turned-auditor started as a senior consultant with Protiviti and is now an experienced manager.
LANGUAGE CAPABILITIES The ability to communicate in English is extremely valuable in international firms based in non-English speaking countries, says Paul Kooijmans, corporate auditor and senior vice president in charge of corporate accounting at Wolters Kluwer, an international information services company based in Amsterdam. Wolters Kluwer requires its auditors to be fluent in Dutch and English.
"If you only work for Dutch companies, you may speak only Dutch. I want them to have much more depth of experience than just working for a Dutch company," Kooijmans explains. "One guy sent me an e-mail in English. He's Dutch and lives in Amsterdam. I called the guy back immediately. He is 25 and not qualified yet. However, if we like each other and his motivation is good, I still might hire him."
Language skills are also prized at Protiviti. Candidates who are fluent in Chinese and Japanese and are familiar with U.S. accounting practices are particularly valuable to the organization for work with clients with international operations, Hirth says.
"These language skills, including reading skills, are imperative to be able to operate effectively in two distinct cultures," Hirth says. "Many times, key employees — even management — may speak limited English, or even none at all." These companies value auditors who can communicate between international offices, and also manage documentation in both English and another language.
According to Robert Melville, director of MSc Internal Auditing and Management at the Cass Business School in London, his students are seeing more opportunities internationally. "Probably the biggest growth areas for internal auditing are in the People's Republic of China — where we have a long history of very successful alumni — Greece, the former USSR, and eastern European countries about to join the European Union," he says.
CERTIFICATIONS Internal audit certifications are not required; however, many organizations prefer some professional accreditation. Certified public accountants (CPA) are common in the field, and more specific audit certification is gaining popularity. "We're hearing about a lot more companies wanting their internal auditors to have some type of certification, and many opting for one or another specialty certification," says James Cashell, professor in the department of accountancy in the School of Business Administration at Miami University in Oxford, Ohio.
According to Ashley Hartley, a product manager at KnowledgeLeader.com, an online research portal for audit professionals, the most-in-demand designations for internal audit candidates include:
* Certified internal auditor (CIA).
* Certified information systems auditor (CISA).
* Certified information technology professional (CITP).
* Microsoft certified systems engineer (MCSE).
* Certified public accountant (CPA)/Chartered accountant (CA).
* Certified management accountant (CMA).
* Certified financial services auditor (CFSA).
* Certified fraud examiner (CFE).
"In the profession, the CIA exam is growing faster than any other," says LSU's Sumners. "The big advantage of the CIA over the CPA is that the CIA is international and much broader in scope. It's much more relevant to the actual job."
A JOB WORTH pursuing
Few occupational fields are impervious to economic slumps, and so it happens that internal auditors may see a slight dip — or at least no rise — in starting salaries over the short term. The field itself, however, remains strong and necessary, experts say.
The 2003 Salary Guide, published by Robert Half International, shows that experienced internal auditors may find sufficient job offerings and room to maneuver in the U.S. job market. However, 2003 average starting salaries for these positions will increase only marginally over 2002 salaries, and in some cases, decrease. For example, the starting salary for a senior auditor at a large company is between $48,000 and $61,500 this year, down 0.2 percent from 2002. An internal auditor with one to three years' experience joining the same size firm can expect to earn between $38,500 and $49,500 in 2003, a 0.6 percent increase from last year. An audit director at a +$500 million corporation can anticipate the largest decrease in average annual starting salary, dropping 6.9 percent this year to between $122,250 and $197,500.
In the United Kingdom, Pal Chakravorty, senior consultant in audit and risk at Greythorn, a recruitment agency, estimates that internal audit candidates with four years of investment banking experience can command an annual salary of between £40,000 and £60,000, plus benefits, in London. Employment seekers with six or more years of experience are generally looking at upwards of £55,000, and candidates with strong skills, such as detailed product knowledge, can earn about £70,000. Chakravorty says that on-the-job salary increases are rarer now than in the past, due to a skills surplus.
Although salary increases are slowing, California State University's Gray contends that good working conditions and relative job security make internal auditing worth pursuing. He adds that in the past, internal auditing evoked unpleasant images for many people. "The old image of auditors was that of the company 'policeman' looking over peoples' shoulders, telling them what they were doing wrong," he explains.
In recent years, however, the field has become more dynamic, Gray says. With emphasis on corporate governance and new technologies bubbling out of Silicon Valley every week, internal auditors can count on increased interest in their work product.
LYNN KOLLER is a freelance writer based in Ormond Beach, Fla.
Sidebar:
Growing Interest in the Profession
INTERNAL AUDITING IS NOT FOR THE UNEDUCATED, nor is it for underachievers — at least at entry-level. The 2003 Salary Guide published by Robert Half International of Menlo Park, Calif., asserts that entry-level hiring in public accounting firms has slowed. According to the report, "Recent graduates face a tough employment market, and only the best candidates with top grades and exceptional internship experience are being considered for available positions." However, this news hasn't stopped the interest in internal auditing at the college level from growing. Both awareness of the field and the number of programs dedicated to internal auditing is up, according to experts such as James Cashell, professor in the department of accountancy in the School of Business Administration at Miami University.
"Over the last few years, I think students have begun to find internal auditing more interesting," Cashell says. "It seems like the nature and perception of the work has changed. The students used to come in with a stereotype of internal auditors, and they don't seem to have that anymore."
Cashell says that students now see fraud detection, operational auditing, risk evaluation of proposed joint ventures, and contributing "value-added services" as functions encompassed in many internal audit positions. The countless functions tackled by internal auditors at different organizations means that an auditor may choose to be a jack-of-all-trades or a master of one.
According to Glenn Sumners, director of the Center for Internal Auditing at Louisiana State University, "The internal audit profession has gone from having one college-level program in 1985 to about 45 programs in seven countries today." Sumners says that many of these programs emphasize accounting as opposed to multidisciplinary approaches, leaving a gap in training. "Internal auditing is a multidisciplinary profession and accounting is only one of the attributes that people look for. Even in light of current events and Sarbanes-Oxley, we're placing more non-accounting people than accounting into internal audit positions," Sumners says. "Many areas are popular, but systems, finance, accounting, and MBAs tend to be most popular."
Sumners contends that the profession is changing dramatically and faces a big training challenge. "We're going to have to refocus some of our education processes. There is a need for additional training on risk and corporate governance," he explains.
According to Robert Melville, director of MSc Internal Auditing and Management at the Cass Business School in London, although recruiting is certainly down at the large accounting firms, other job markets will absorb some of that surplus. Those looking for internal audit positions should not face unreasonable competition in the United Kingdom, he says.
"Chartered accountants used to recruit 10 percent of all the U.K. graduates, with about 10 percent of them going to just KPMG," Melville says. "Now firms are diversifying, and a lot of them are using the consultancy arms to employ internal auditors who they then farm out."
Melville has found changes in the type of students interested in auditing careers. "One thing that I have really noticed over the years is that those wishing to make a career as internal auditors are younger — my students' average age is 23, down at least a decade in five years — and female, with an 80/20 ratio of female to male, a complete turnaround in a few years and totally against the pattern in other business courses here," he says.
Melville is seeing those changes in his own university requirements, including the MBA program. "Even our MBA students are influenced by internal auditing now," Melville says. "We now place corporate governance in the core subjects, where it has equal status with strategy and other traditional MBA subjects."