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Certified Internal Auditor Definition
A certified internal auditor is employed by a company or the government to review the financial records of that company or the government before an external auditor comes in. CIAs receive special certifications conferred by IIA (Institute of Internal Auditor); this certification allows auditors to work anywhere in the world.
A Little More on What is a Certified Internal Auditor
A Certified Internal Auditor is familiar with government agencies and financial institutions and corporations. An auditor with this certification audits financial records of the employer to ensure there are no gaps or details that cannot be explained.
Just like CIAs, certified public accountants, CPAs, can perform auditing as they have the skills. However, a CIA is trained to specifically review financial records. The main difference between CPAs and CIAs is that while CPA is a credential only recognized in the US, the CIA is internationally recognized. Companies can employ CPAs as external auditors but CIAs are more skilled to handle internal audits. Sometimes, an accountant can hold both CPA and CIA certifications.
To get CIA certification, an accountant will need to have a bachelor’s degree and at least two years of work experience in a related field such as quality and compliance assurance or internal control. To be certified, the accountant has to go through 100 and 150 hours of study and afterward submit a letter that affirms their character. After certification, an accountant will be required to engage in 40 hours of continuing education every year to maintain certification.
Certified Internal Auditors can work in an executive position such as chief audit executive or they can specialize and work as compliance auditors, internal auditors or audit managers. They can also work in investigations and information technology auditing. CIAs earn slightly lower salaries than CPAs, but it depends on the position the CIA or CPA holds and the employer. CPAs earn a median pay of $62,123 while CIA earns $59,677 in the US.
A code of ethics governs internal Auditing. In 2008, for example, the Lehman Brothers were caught up in a scandal where executives received high salaries despite the financial hurdles the company was experiencing. Again, inadequate internal controls enhanced manipulation of the accounting systems and fabricating of numbers on the balance sheets. The actions were termed as illegal, biased and unethical.
Internal auditing aims at detecting fraud and assessing internal control. Auditing methods migrated from England to the US during the industrial revolution. By the 20th century, auditing methods were standardized.
IIA was launched in 1941 after which internal audit was viewed as a profession. In 1960, Congress stated that executive agencies should have internal audits in the internal controls system.
When the Foreign Corrupt Practices Act was passed in 1977, it overhauled internal auditing as it prevented companies from conducting bribery and hiding of funds.
The hiring of auditors was projected to increase by 11 percent between 2014 and 2024. The growth is attributed to legislation in financial reporting, mergers, acquisitions, corporate taxes, a need for increased accountability and the changes in the roles of auditors.
Government agencies and corporates will always hire auditors to keep their internal controls intact.
References on Certified Internal Auditor
Academic Research on Certified Internal Auditor (CIA)
- The perceived benefits of certified internal auditor designation, Myers, P. M., & Gramling, A. A. (1997). Managerial Auditing Journal, 12(2), 70-79. This refers to a photographic paper examining a study conducted to analyze empirical evidence as related to the perceived benefits of CIAs and their career advantages and perceived competencies. The study sample 200 firms where it sent 24 questions to internal audit directors, chief financial officers and one member in the board of directors of the 200 firms.
- Internal audit quality and earnings management, Prawitt, D. F., Smith, J. L., & Wood, D. A. (2009). The Accounting Review, 84(4), 1255-1280. This paper observes that there is minimal research on the effects of internal auditing on external financial reporting of companies. It examines the quality of internal audit function, IAF, and its relation to earnings management.
- Internal auditing: history, evolution, and prospects, Ramamoorti, S. (2003). Research opportunities in internal auditing, 1-23. This paper is a record of the history of internal auditing, its evolution and how it works. The author observes that to understand the history of internal auditing completely, you have to understand the history of the Institute of Internal Auditors which was founded in 1941.
- Practitioners’ and users’ perceptions of the benefits of certification of internal auditors, Gramling, A. A., & Myers, P. M. (1997). Accounting Horizons, 11(1), 39. In this paper, the author examines the benefits of certification of internal auditors as viewed by practitioners and users. The paper samples the views of different practitioners and users.
- The development of internal audit in Saudi Arabia: an institutional theory perspective, Al-Twaijry, A. A., Brierley, J. A., & Gwilliam, D. R. (2003). Critical Perspectives on Accounting, 14(5), 507-531. This is an explorative paper that analyzes internal audit incorporates in Saudi Arabia. The study shows that the internal audit sector is not well developed and in departments where it operates, it lacks adequate resources and qualified staff. In other cases, where internal auditors exist, they are restricted on the degree of independence where they can be asked to audit compliance and not performance. In conclusion, the paper suggests that states should play a coercive role in establishing internal auditing in organizations.
- The need for an internal auditor report to external stakeholders to improve governance transparency, Archambeault, D. S., DeZoort, F. T., & Holt, T. P. (2008). Accounting Horizons, 22(4), 375-388. This paper examines the role of internal auditors in providing reports for external use. It asserts that investors need internal reports to help them make decisions. It also says that if existing executives are to continue, internal audit reports are required.
- Internal audit efficiency evaluation principles, Savčuk, O. (2007). Journal of Business Economics and Management, 8(4), 275-284. For firms and corporates to stay afloat in a highly competitive field, they need to have improved risk and quality management and great accountability to ensure information required for decision making is offered on time. Companies are pressured to identify all risks they face including social, financial, ethical and environmental. In reaching their goals, companies need financial auditors. This paper examines factors that affect the efficiency of internal auditing and offers simple criteria for firms to assess the effectiveness of Internal Audits.
- A review of prior common body of knowledge (CBOK) studies in internal auditing and an overview of the global CBOK 2006, Abdolmohammadi, M. J., Burnaby, P., & Hass, S. (2006). Managerial Auditing Journal, 21(8), 811-821. This paper analyzes a study by CBOK, global common body of knowledge, that seeks to broaden the experience on the practices of internal auditing throughout the world.
- Internal auditor perceptions on audit committee interactions: A qualitative study in Malaysian public corporations, Zain, M. M., & Subramaniam, N. (2007). Corporate Governance: An International Review, 15(5), 894-908. The author of this paper observes that the audit committee (AC) and internal audit function play a key role in corporate governance. The purpose of this study is to broaden the knowledge on perceptions of CIA and interactions with AC in Malaysian corporates.
- Internal audit: an Australian profile, Cooper, B. J., Leung, P., & Mathews, C. (1994). Managerial Auditing Journal, 9(3), 13-19. This study describes another study that was conducted on Australian private and public corporates. The survey under analysis focused on chief executives and their view of internal auditing. Executives had positive responses with most of them supporting internal auditing, agreeing to its usefulness and the need for internal audits as a means of enhancing operational efficiency. However, some issues are underlying the interior audit sector in Australia, but the support is encouraging.