Internal auditor in a company - Essay Example

Week I Individual Assignment Connie Johnson November 19, ACC/544 – Christine Errico of Phoenix It is imperative for companies to have clean accounting records due to the fact that stakeholders expect financial statements that are free of fraud and material error. At first glance it is apparent that your organization has an accounting system that is out of control. Your organization must prioritize fixing the accounting flaws in the system because the Sarbanes Oxley Act of 2002 has raised the accountability of executive managers.

The company needs a professional assessment of its internal control deficiencies. The firm must hire an internal auditor as soon as possible to evaluate the firm’s accounting system and recommend corrective actions. “The Institute of Internal Auditors defines internal audit as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations” (Menk). During the past decade the auditing field is growing in demand due to new regulations such as the Sarbanes Oxley Act which have raised the bar for accounting professionals.

Section 404 of the Sarbanes Oxley Act mandates that all public companies establish internal control mechanisms and procedures” (Searchfinancialsecurity, 2011). These mechanisms must be tested on a recurrent basis for accuracy and effectiveness. The best person to put in charge of this task is an internal auditor. Due to the fact that the company must continue the internal auditing process year long it is cheaper for the company to hire an internal auditor full time than to outsource the work to another accounting firm.

There are many benefits associated with internal audits. For instance the establishment of internal controls can lower administrative costs and increase operating margins. The reliability and accountability of the entire accounting system improves by hiring an internal auditor. The decision to hire an internal auditor will save the company money since it is estimated that it can costs upwards of 0.3% of your total revenues to hire outside accounting consultants to perform the function (Menk).

Another benefit of hiring an internal auditor is that it reassures important stakeholder groups such as shareholders, lenders, employees, customers, government, and the community that the firm’s accounting is precise and accurate. The firm must hire an internal auditor to fill a void that is currently not being attended by the current accounting staff of the company. Neither the chief executive officer (CEO), chief financial officer (CFO), nor controller of the firm should perform the internal audit because it would constitute a conflict of interest associated with agency problems.

The firm should hire a candidate themselves using the services of human resources department to recruit the new internal auditor. The median salary of an internal auditor in the United States is $49,376 (Salary, 2011). Due to the fact that the company wants to fill the vacancy quickly the firm should offer a starting salary 10% above market or $54,314. The internal auditor will be a full time employee of the company. Whenever he is not performing internal auditor duties the accountant will be part of the executive management team.

One of the expertises of managerial accountants is to provide business consulting to the managerial staff. The internal audit candidate must hold a bachelor’s degree in business administration with concentration in accounting or finance. He must have at least five years experience working as an accountant including at least two years as an auditor. The candidate must hold a certification in internal auditing from the Institute of Internal Auditors. Some of the certifications that the Institute of Internal Auditor offers are: 1.

Certified Internal Auditor (CIA) 2. Certification in Control Self Assessment (CCSA) 3. Certified Financial Service Auditor (CFSA) 4. Certified Government Auditing Professional (CGAP) 5. Certification in Risk Management Assurance (CRMA) The candidate must hold at least one of the five certifications. Due to the fact that the company expects the candidate to provide valuable feedback during managerial meetings the candidate must hold a M.B.A. It would be preferable if the candidate held a C.P.A or C.M.A.

certification. There are many benefits of having a qualified internal auditor. The auditor will perform the internal auditing function every trimester. A qualified candidate with excellent credentials will add value to the firm by offering business advice on how to perform process improvements to improve the firm’s efficiency. References Menk, T. Internal Auditing: Key to Helping Your Operations and Bottom Line. Retrieved November 19, 2011 from http://www.financialexecutives.org/eweb/upload/chapter/Pittsburgh/NewsletterArticle-InternalAuditing.

pdf Salary.com (2011). Internal Auditor I. Retrieved November 19, 2011 from http://swz.salary.com/SalaryWizard/Internal-Auditor-I-Salary-Details.aspx Searchfinancialsecurity.com (2011). SOX Section 404 (Sarbanes-Oxley Act Section 404). Retrieved November 19, 2011 from http://searchfinancialsecurity.techtarget.com/definition/SOX-Section-404