Internal Auditor, External Auditor, and CFO Roles Compared
This essay examines three key financial oversight roles within a corporate organization: the internal auditor, the external auditor, and the Chief Financial Officer (CFO). It outlines the distinct responsibilities of each position, explores the ethical considerations each professional must navigate, and identifies inherent conflicts that can arise among them. The paper also discusses how each role approaches balance sheet items differently, using employee layoffs and severance packages as a concrete example. Finally, it considers how such conflicts might be managed—and where they may prove irreconcilable—within the corporate governance structure.
- Introduction: Overview of three financial oversight roles
- The Internal Auditor: Duties, methods, and ethics of internal auditing
- The External Auditor: Independent review role, objectivity, and reporting
- The Chief Financial Officer (CFO): CFO responsibilities including strategy and forecasting
- Conflicts Among the Three Roles: Inherent disagreements and balance sheet perspectives
- Conclusion: Managing conflicts and their limits
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What makes this paper effective
- The paper uses a clear comparative structure, defining each role in turn before analyzing where they intersect and conflict, which makes complex organizational relationships easy to follow.
- It grounds abstract role descriptions in a concrete example—employee layoffs and severance packages—illustrating how the same balance sheet event is perceived differently depending on professional perspective.
- The conclusion acknowledges a realistic limitation of conflict resolution: that financial professionals who strongly disagree with leadership may simply lose their positions, which adds an honest, critical dimension.
Key academic technique demonstrated
The paper demonstrates comparative analysis across multiple professional roles, organizing parallel criteria (responsibilities, ethics, balance sheet perspective) consistently for each subject. This structural parallelism helps readers track similarities and differences without losing argumentative focus.
Structure breakdown
The essay opens with a brief orienting introduction, then devotes one section each to the internal auditor, external auditor, and CFO—covering duties, objectivity requirements, and ethical obligations for each. A synthesis section addresses conflicts among the three roles, including balance sheet implications. The essay closes by noting how conflicts may be partially managed but are sometimes irreconcilable given the power dynamics of employment and client relationships.
Introduction
This essay examines three key financial roles within a corporate organization: the internal auditor, the external auditor, and the Chief Financial Officer (CFO). It reviews their respective responsibilities, inherent conflicts between them, and ethical considerations for each. Finally, it addresses how each position approaches balance sheet items differently.
The Internal Auditor
The internal auditor typically reports to the CFO and is responsible for reviewing work done by fellow employees, checking for errors, oversights, and irregularities. The standard method used to conduct an audit involves examining a transaction or process and comparing how it was handled with the way it is documented in an operating procedure or accounting convention, then reporting to management on any differences. The internal auditor may use a number of methods or tools to capture information, sometimes even designing or adapting an existing tool to track the information being reviewed (Blackburn, 2011).
Information presented in the internal auditor's report is vital to management's ability to run a successful business. The internal auditor is responsible for reporting information in a factual, objective manner that is free from emotion or conjecture. This objectivity allows management to decide what action is needed, although the auditor may also make recommendations within the audit report (Blackburn, 2011).
In carrying out his or her duties, the individual in this role walks a fine line between management and other employees with respect to ethical considerations. On one hand, the internal auditor is an employee expected to serve the organization; on the other hand, he or she also needs to form sound working relationships with fellow employees. Skills required to be a good internal auditor include an inquiring mind, the ability to interact with different types of people, a thorough understanding of work processes and how they are documented, and the skills to prepare and present management reports (Blackburn, 2011).
The External Auditor
An external auditor performs independent, third-party reviews of the financial records of a client's company. He or she evaluates accounting, payroll, and purchasing records, as well as documents related to investments, stocks, or loans. The external auditor's role is to provide an accurate and unbiased analysis of the company's financial condition (Damewood, 2011).
It is imperative that an external auditor be objective. No connection to the company is allowed, since it could be construed as biasing the auditor's report. The external auditor must not hold stock in the company or have any monetary stake in any of its subsidiaries or holdings (Damewood, 2011).
To be effective, fair, and equitable, an external auditor should familiarize him or herself with the nature of the business being audited prior to beginning the engagement. Being aware of differences between industries and types of companies is important for the auditor's conclusions to be accurate and constructive (Damewood, 2011).
Businesses often depend on an external auditor to act as their financial judge and jury. The external auditor's findings can strongly influence the company's reputation in both the private and public sectors. If the auditor's conclusions about assets, debts, tax responsibilities, and payments do not match those on the company's records, there can be serious repercussions. When an external auditor finds irregularities, he or she documents them and makes notes on suggested improvements. These findings may relate to accounting methods, internal controls, spending habits, or how employees are classified and compensated (Damewood, 2011).
In some instances, an external auditor's services are required by a regulatory agency or by shareholders who have doubts about the accuracy of a company's financial claims. The external auditor is bound to report any evidence that supports their suspicions. Once the audit is completed, the external auditor presents the findings to management. Areas that the report normally covers include the state of accounts payable and receivable, the auditor's opinion of record-keeping systems, and the company's overall financial strength (Damewood, 2011).
Conclusion
Conflicting viewpoints among the internal auditor, external auditor, and CFO can be mitigated to a degree by establishing clear descriptions of the scope of work for each individual, ensuring clear communication of the company's goals and objectives, and agreeing to disagree in certain cases. Ultimately, however, such disagreements may prove irreconcilable, because few employees—such as the internal auditor—and few professional service firms—such as the CPA firm that assigns the external auditor—can expect to retain their positions and engagements when they disagree strongly with the CFO or the board of directors that hired them.
Works Cited
Blackburn, V. (2011). What does an internal auditor do? Conjecture Corporation. Retrieved July 5, 2011 from http://www.wisegeek.com/what-does-an-internal-auditor-do.htm
Damewood, C. L. (2011). What does an external auditor do? Conjecture Corporation. Retrieved July 5, 2011 from http://www.wisegeek.com/what-does-an-external-auditor-do.htm
Institute of Internal Auditors. (2010). How do internal and external auditors differ and how should they relate? Retrieved July 5, 2011 from
Investopedia. (2011). What does a Chief Financial Officer (CFO) do? Retrieved July 5, 2011 from http://www.investopedia.com/ask/answers/04/042204.asp
Supporting Advancement.com. (n.d.). Chief Financial Officer. Retrieved July 5, 2011 from http://supportingadvancement.com/employment/job_descriptions/advancement_services/chief_financial_officer.htm
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