What is an External Auditor?

An external auditors are public accountants who conduct audits, reviews, and other work for their clients. An external auditor is independent of all clients, and so is in a good position to make an impartial evaluation of the financial statements and systems of internal controls of those clients. The resulting auditor opinions are highly valued by members of the investment community and creditors, who need an independent appraisal of the financial statements of organizations. These audit opinions are required by the Securities and Exchange Commission for publicly-held companies. Lenders and many investors also require audit opinions on the financial statements of their borrowers and investees, respectively. This means that external auditors are generally in high demand.

The External Auditor Certification

External auditors are certified by a governing body, which in the United States is the American Institute of Certified Public Accountants. As certified public accountants, external auditors have proven that they have a certain minimum level of training and experience, and have passed a lengthy examination. These auditors must also fulfill periodic continuing professional education requirements in order to keep their certifications current. Because five years of college accounting courses are required to be a CPA, many college students prefer not to make the investment in becoming one. This means that the external auditor profession is now in something of a crisis, with roughly three-quarters of all CPAs at or near retirement age.

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The Difference Between an External Auditor and Internal Auditor

Internal auditors are employees of a company, and so are not independent from it, as is the case with an external auditor. Further, internal auditors are more concerned with investigating whether processes are functioning properly, while external auditors are more concerned with whether an entity’s financial statements are fairly stated. In addition, internal auditors are more likely to obtain the Certified Internal Auditor designation, while external auditors obtain the Certified Public Accountant designation.