Is Hiring an Auditing "Alumni" Right for Your Company?

This is an opinion piece and is based on my observations and experience. It is, in no way, meant to criticize anyone’s career path choice in the field of accounting. It is, rather, insight into choosing a candidate who will be a good fit in a position in the private industry.

Over the years, I have been a job seeker at one point in time or another. When I’ve looked at job postings for higher-level accounting positions, a common requirement or preference that I see coming from employers is experience working at a national or large local public accounting firm. Translation: an auditor. Having that experience on a resume does bring about a certain level of prestige. In my final year of college, I remember that many accounting grads were seeking employment with one of the Big 6 (used to be Big 8, now Big 4). It was a way of getting your foot in the door in the world of accounting and was viewed as the best way to “write your own ticket” for future career opportunities.

As far as hiring an auditing “alumni” for your organization, it may or may not be the best fit. Here are some factors you should consider before making public accounting experience an absolute must on your job posting.

Does your organization require an annual audit? Companies that require audits usually fall in one of two major categories: they are either publicly traded or their bank requires it due to loan covenants. If your organization goes through an audit each year, hiring people with audit experience can be beneficial. They can provide insight as to what auditors look for and what the organization needs to do on its end to make the audit go smoothly. On the flip side, it can be equally advantageous to hire someone who has experience in BEING audited. Usually, the auditor sends a checklist of schedules and narratives that the client needs to complete prior to the audit commencing, called the PBC (prepared by client) list. In my personal experience, the longest PBC list I worked with was 72 pages long. That’s a lot of stuff to prepare! People with experience being audited will have the skill set to manage that list whether it be through delegating the tasks to others, preparing the schedules and narratives themselves, or a mixture of both. So think very carefully about the duties of the position and what will be expected from the person in that position from an annual audit point of view.

How hands-on is the position? Forget about job titles for a moment. Why? Because, for example, the duties of a controller at one company can greatly differ from the duties of a controller at another company. Some controllers look at the organization from the 50,000 foot level while other controllers actually do some or most of the day-to-day work. The smaller the company, the more hands-on the controller gets. Keeping that in mind, think about the position you’re hiring for and how hands-on it is. A candidate who has most, if not all, auditing experience has spent his or her entire career not producing the end product, but reviewing it. That has value, of course, but if the position you’re hiring for requires generating deliverables and not reviewing them, that candidate’s skill set will not be a good match. Reviewing the deliverables? Great match!

Will the position entail communicating with other departments? There’s a world of difference between talking to a person in the accounting department versus talking to someone, say, in sales. The same could be said about any department whether it be operations, engineering, admin, or marketing. Their priorities are different, their motivations are different, and their communication styles are different. Who do auditors communicate with? Their coworkers – accountants. If they’re on-site performing an audit, who do they go to with questions? Someone in the client’s accounting department. As a rule, everyone they communicate with is in accounting. There’s little opportunity to gain experience communicating across departments. If the position you’re hiring for involves frequent cross-departmental communication and collaboration, a candidate with private industry background will be more likely to have that experience and be a better fit. Again, it all depends on what’s important to you and the organization.

Does your organization have a lot of “hard-to-value” items and transactions? Examples of these include leases, goodwill, hedging instruments, stock options, pension plans, and R&D expenses. Also, if your organization keeps inventory that can be quickly obsolete due to technological advancements or is sensitive to trends and fads, difficulties could arise when trying to put a value on that inventory at year-end. This is where auditors excel. The whole purpose of an audit is to ensure that the financial statements are fairly represented and are materially correct. Many items are easy to value such as cash, accounts receivable, and prepaid expenses. Other items, not so much. This is where auditors come in. They determine that the valuation method the client used for each asset and liability item is sound in methodology and fairly assesses the value of each item. If your organization has a lot of items like this, someone with auditing experience will have the ability to ensure the valuations are sound. Not to say someone with industry experience won’t have the ability, but auditors do have a leg up on this topic.

All experience brings value to the table, but matching up the wrong type of experience to the wrong type of position will be frustrating not only for your organization, but for the employee as well. So before you add public accounting experience to your requirements list on your job posting, consider the four questions presented and ensure the skill set your candidate has will satisfy the expectations of the position and the goals that will go along with it. And, above all things, an employee who feels fulfilled, fully utilized, and set up to succeed is a happy employee.