Internal auditors vs external auditors: Which career is right for you?

Auditing provides you with the opportunity to work in virtually any industry. Whether you want the variety of clients found with a Big 4 or mid-tier accounting firm or you prefer working with single organization, there is a growing need for auditors and a variety of career paths available. 

But to get there, you have to understand the difference of internal auditors vs external auditors and find which option is right for you. 

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What is auditing? 

Auditing in the world of finance and accounting refers to the formal evaluation, analysis, and reporting of a person’s or organization’s financial well-being and accuracy, data security, and compliance. 

In-house staff or a third-party like a public firm or the IRS may perform an audit.¹ When looking at internal auditors vs. external auditors, they both practice auditing, but why, when, and end use-cases vary significantly. 

What is an internal auditor? 

An internal auditor is an auditing professional who forms part of a company’s staff. Internal auditors review their company’s finances, processes, data security, reporting, etc. to optimize efficiency and inform decision-making.

They report to management and directive boards, detailing the results of their audits for internal purposes only. They do not need to share the results outside the organization. 

Internal auditors add incredible value to their organizations by:  

• Improving operational and spending efficiency 
• Helping leaders make better decisions for the company 
• Identifying any cases of fraud or noncompliance 
• Advising on corrective measures in case of incompliance 

An internal auditor’s ability to pinpoint and correct compliance issues, whether intentional or unintentional, before an external audit is crucial to a company’s overall health. This helps avoid the fees and damaged reputation that come when an external audit uncovers such infractions. 

Internal auditor skills 

Internal auditing requires skills beyond just basic accounting best practices. 

To grow your career as an internal auditor, strengthen your skills in areas such as:² 

• Financial management understanding 
• Risk assessment and mitigation strategy 
• Communication (written and spoken) 
• Data analysis 
• Tech prowess 
• Knowledge of current laws and regulations 
• Critical thinking and flexibility  
• Independence and objectivity 
• Industry and business-specific knowledge 
• Continuous learning
   

What is an external auditor? 

An external auditor works for a third-party firm or agency, performing independent and non-biased assessments for many clients’ financial practices. 

These audits report on processes, accuracy, and any areas of incompliance. External audits have many uses, including:³ 

• Providing confidence that reporting accurately represents performance 
• Producing financial transparency 
• Ensuring compliance 
• Validating internal controls 
• Enhancing decision-making 

External audits are shared publicly with shareholders, investors, governing agencies, etc. If incompliance is detected, these findings are also shared, and consequences enforced depending on the nature of the violation.

External auditor skills

Internal auditors vs external auditors share many skills—areas like auditing best practices, communication, data analysis, reporting, critical thinking, and a deep understanding of updated laws and regulations. 

However, there are differences between an internal and external auditor’s skillset. While internal auditors must have a deep understanding of their industry, external auditors work with multiple clients across many industries. While their industry and organization-specific knowledge is therefore not as vital, they must have excellent competence in the details of: 

• Business law and regulations 
• Agencies like the SEC 
• Compliance acts like the SOX 
• Tax law if performing an IRS audit 

External auditors create reports for these outside entities, so it’s imperative to understand both the regulations themselves and their reporting requirements. 

Likewise, external auditors need not only outstanding communication, but also peak charisma and people skills. They are constantly meeting new teams (that they must evaluate!). Quickly getting to know these individuals and earning their trust is essential to performing an efficient and accurate audit.

Internal auditors vs external auditors 

While both sets of professionals practice auditing, the difference between an internal and external auditor is in scope, purpose, and internal vs external reporting. 

Career paths: internal auditors vs external auditors 

Internal auditors vs external auditors likewise advance down differing career paths. 

Internal auditors: As a staff member at an organization, an internal auditor will likely advance into a senior auditing role, then team leadership, management, and eventually a senior financial management position like CFO. 

External auditors: Likely working at a public accounting firm, external auditors normally start in a junior auditing role, then moving into a senior position, then team leadership, management, and eventually firm partner. On the other hand, external auditors could also lean into entrepreneurship—taking on their own clients, consulting, or opening their own firm. 

Salary: internal auditors vs external auditors

Internal auditors and external auditors both have high earning potentials. As they grow their careers, they will likely earn $120,000 or more annually.^{5 6} That said, the national average salary for external auditors is slightly higher than that of internal auditors: 

Internal auditors: $76,185⁷ 

External auditors: $86, 952⁸ 

However, the best way for both internal and external auditors to grow their salaries is by advancing their resumes with experience, credentials, and continuing professional education.

Grow your auditing career 

Whether you lean toward becoming an internal auditor vs external auditor, earning your Certified Public Accountant (CPA) license is a great step to advancing your career. 

Start your journey to becoming a CPA (and specializing in internal or external auditing) by downloading Becker’s FREE CPA Exam eBook! 

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