How does an audit engagement take place?

Directed the audit today with the interview of a Senior. Excellent reading!

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Hello and thank you for accepting the interview! What is your journey?

After a bachelor’s degree in science, I joined a bachelor’s degree in economics. Then I went to business school. During schooling in school, I followed the DSCG (Higher Diploma in Accounting and Management) which allows to validate 5 of the 7 necessary EU. I found the courses quite comprehensive since I was able to deal with market and corporate finance, accounting, management control and audit. It is a journey that prepares well for the profession of financial auditor.

My first internship in business school was conducted in management control. It is, in my opinion, a good stepping stone for audit. As a result of this internship, I wanted to try the practice experience. So I completed an audit graduation internship in one of the Big 4 (Deloitte, KPMG, EY and PwC) in the province, for industrial clients. I then had a CDI offer, always in a Big 4, in Paris, but this time for their Financial Services Business Unit which brings together clients like banks, insurers or asset managers.

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Audit Overview

What is the job of auditor?

When a company reaches a certain size, it must have its accounts certified. That’s where the listener comes in. His job is therefore to verify that the accounts presented by his client are true to reality, with a reasonable level of assurance, by presenting in particular an opinion on these.

The team of auditors will be interacting with the client to better understand how the financial statements are built. The various stages of an audit engagement will be revisited later.

What are the great Parisian actors?

There are of course the so-called Big 4 firms, namely KPMG, PwC, EY and Deloitte. Another great French actor is Mazars, who comes to snack market shares by offering fewer fees than its competitors. There are also smaller firms such as Aca Nexia, BDO, RSM, Denjean & Associés, GVA, Compagnie Fiducière or Grant Thorton.

Large listed structures such as L’Oréal or BNP Paribas are audited by Big4 firms. Indeed, these are the only firms that can mobilize and coordinate teams all over the world, including soliciting teams of experts (tax, prudential, legal, etc…). Also, listed companies generally prefer to be audited by known firms on the spot.

Is there a difference between an audit internship in Paris and the other in the province?

Paris vs. the province

The difference between practicing this profession in the province and practicing it in Paris lies in the typology and number of clients that an auditor will have in his portfolio. This will therefore impact his experience in the practice, but also the commutes he will have to make on a daily basis.

Since the headquarters of large companies, including the vast majority of the CAC40, is usually located in Paris, a Big 4 listener on a wide heading segment may have “big customers”. In general, an auditor is assigned 1 or 2 large customers rather than 5 or 6. The vast majority of purely financial clients are in Paris.

For example, I had been able to work in the province on 8 different files, 2 of which were significant in size.

Interests of missions

In terms of interest, I think it’s a good thing to do both. Honestly, auditing a small structure of 30 million euros in turnover is not necessarily less interesting than auditing a CAC40 actor. In the first case, you can see everything from A to Z and come out with a good overview, which will never really be the case for a wide heading structure. Working for the same customer can also be weary by force.

On top of that, being on a multitude of files reduces the risk of working with a not very friendly customer and an average team. The experience will thus be more representative of the profession of auditor. Personally, I am on a single client, 20 minutes from home, with whom we have good relationships. On top of that, my team is top. I was lucky!

Long-term Considerations

Another important point: if you are a good element and you want to move quickly, I think it may be more interesting to be on a multitude of files to be more visible in cabinet. Conversely, being on the client of an Associate who has weight in the firm can just as much help. To see.

Is it appropriate to do an internship in a small audit firm?

I don’t think, the firm’s brandname is very important in this sector and it can be feel about post-audit opportunities, salary and career development in general.

For an internship, it can be an option. I think it is even more interesting to carry out an audit internship in a small firm than an internship in management control or similar.

For internships in small firms, you must remain vigilant in relation to the missions that we can give you. Indeed, there may be a risk that you will be entrusted with purely accounting missions. Even if having good basics in accounting helps with auditing, it’s not the same job.

How is a team of auditors organized? Are we sectorized?

It depends on the organization of the cabinet. Some divide their teams by industry, such as telecommunications or industry, when others will distribute them according to the size of the clients, that is, their capitalization. In general, the financial sector, comprising banks, insurers and asset managers, is still separate.

A provincial branch of a Big4 firm could be more elastic on the staffing of its employees.

Become an auditor

What experiences and qualities are sought to perform an internship in this environment?

Training and professional experience

It is not mandatory to specialize in accounting, even if it can help. On the other hand, a course related to finance or business management seems to me to be mandatory.

In terms of professional experience, we will generally expect Potential CDI of experiences related to the financial branch’s perimeter. But in the end, we expect mostly people who work fast and well. Profiles passed by the board, M&A or similar are of course appreciated.

In terms of training, the lower the school in the rankings, and the more likely to be taken decreases. A student leaving HEC, ESSEC or ESCP will almost always be received in interview while nothing is guaranteed for a student out of a business school in the top 10.

I also noticed that the Big4s enjoyed engineering profiles very much. We see it on the composition of promotions every year.

Qualities and schedules

At the level of the desired qualities, one wants someone rigorous, reliable, curious, with a good critical mind (audit of accounts obliges), a good relational and who can establish a good relationship with the customer on the term.

An important point is to pay close attention to the schedule since the recruitment periods to compose promotions (internships or CDI) are often well ahead of the start date. Don’t miss the check mark!

Another possibility is co-optation. It is possible for an internship. Also do not forget to participate in your school’s corporate forums. Generally, these are important recruitment channels that provide a first link with the firm.

How to best prepare for interviews?

Presentation of the route

In my recollection, my interview had not had a very important accounting dimension. Indeed, firms do not expect to have an accountant in front of them for a recruitment on an internship or a permanent appointment.

As with any interview, you must be able to present your journey well. Highlight the experiences that will allow recruiters to say that you will be doing a good job on missions.

Sectors and Trends

You need to know how the cabinet is sectorized. If you applied for a particular sector, it will be necessary to know the clients in the portfolio for the sector in question and be able to explain the reasons for your choice.

Master the large accounting aggregates of each of the clients (turnover, capitalization, net income, etc…) and, if applicable, the major macro and current trends related to the sector in question.

Technical issues

For technical concepts, you need to know how to build a balance sheet, a profit and loss statement (P&L), and a cash flow statement. A good exercise to do is, in my view, to open an annual report and understand what are the criteria for recording a particular economic fact in a particular heading.

You can also open an accounting book, to get acquainted with the major accounting principles. Preparations for interviews, a corporate finance type, can help a little.

Is the DSCG (Higher Diploma in Accounting and Management) a must pass for an auditor?

It is not mandatory at all but it is a plus. The firm encourages us to pass it through bonuses and days off. However, I have already seen listeners with quite a lot seniority without DSCG.

You should also know that it is quite time-consuming. In my memories, there are 7 EU to validate and the 2 are not automatically validated by school curricula are the hardest to get.

The daily in auditing

How is an audit mission going? What are the main steps?

Preliminary

You normally have an agenda that allows you to see where your next mission will take place, its duration and the composition of the team. If you don’t have too much work, you can contact the head of mission upstream to introduce yourself and learn more about the organization of the mission. If it is a former client, you can optionally download the different working databases of the old missions having was carried out on this client.

These databases are very valuable because they allow you to see which will be your main interlocutors, where are complex or risky points, which positions will take the most time, what are the key audits matters (key audit points). This will give you a good vision on how to conduct the mission and allow you to anticipate any problems.

It is a time when you also need to be curious and be interested in the business of the customer and the news affecting him. You can read the financial communication he makes, the recent annual or similar reports.

As a rule, the firm’s audit engagement is often related to an old mandate, so all the work of acquaintance with the client is already done. The question is whether this has been formalized or not. For an intern or junior, apart from their personal interest, it is not useful in everyday life to have an excellent view of the company’s strategy or operations. Instead, you will need to get closer to a team leader to know what you are going to work on precisely and thus try to acquire the necessary notions in your tasks.

At the customer

Once at the client, you will complete the “planning” phase. This phase should allow you to understand the operations of the structure in the broad sense and above all the various risks to which the financial information issued can be submitted. It is also during this phase that you define the work you need to perform as an auditor.

During this phase, you organize meetings with the top management of the structure and its various functions (legal, HR, finance, treasury, internal control and audit, risk, etc…). This allows you to identify current important topics and their impact on client financial statements.

Then there is an implementation phase: it is the audit phase itself, the one that occupies 90% of our time. It is during this phase that you will exchange a lot with the customer, down the accounts you scoped: these are the accounts significant in terms of amounts, or risky by their typologies (the provisions being established by the client). This is the most interesting phase because you have to adapt to the client, to the peculiarities of his business and it is especially where you can identify anomalies in the accounts.

If I take the example of validating an overperformance commission generated by a fund, I will try to understand the performance of the fund in question, understand the formula for calculating the benchmark that the fund must beat, compare this performance with the current performance of the fund and then verify that we find accountable speaking the products made, latent or crystallized shares in the accounts. This will include detailed tests, calculatory reperformances but also an understanding and validation of the IT tool used by the customer.

The Final Stage

At the same time, you have to document your work, that is, to build audit evidence. This work is done rather by juniors. In the final phase, we point the financial statements to ensure that everything is OK for presentation to the Board of Directors. We also need to be sure that there were no post-closure events that could challenge financial information.

What is the pace in audit?

This may vary depending on your customer portfolio and their closing dates.

In general, the missions that take us the most time are year-end audits that run from January to April. The audit of the first half of the year is a bit time-consuming and runs from July to August. The rhythm is usually correct the rest of the time.

You can try to be staffed on clients being close to your home (which I did), this significantly improves its quality of life.

What about the schedules?

Again, it depends quite a lot on your firm, the composition of your team and your client. For me, the period from January to April is the hardest. We arrives between 9am and 9:30am and leaves between 8pm and 23h. The advantage of having a single customer is that it is easier to manage their workload. Personally, it allowed me to avoid peaks (nocturnal) as it can happen to some.

Out of season, i.e. outside the periods of January — April and July — August, a normal day ends around 7pm, or even a little before, if there is not much work.

What can an intern’s assignments be?

The Trainee’s Hard Life

The trainee’s job is quite ungrateful! (Laughter) In general, they are given relatively time-consuming, repetitive and untechnical things.

For example, they are asked to regain the cash position of the company by reconciling the various statements and reconciliation banking. They may also be asked to retrieve sets of proof of income validation audits. Even if it is something very operational, it is far from being as simple as it seems. If, for example, you want to make sure that the 100 million turnover that the customer receives comes from the sale of paint jars, you will need to perform a test where you will come challenging an operation set. For example, you will need to validate the accounting record of the sale of a 20€ paint jar. Was it recorded in the correct period? Was it actually recognized as income received or was it required to be recognized as a debt? If debt, should it be recognized as doubtful because old or bad payer customer?

To return to the paint jar sold for 20€, you will have to collect the following items: invoice, voucher order, delivery note and proof of payment if income is not classified as debt. These elements will allow you to link the transaction to the correct accounting period, including understanding the terms and conditions of sale and understanding when the transfer of ownership took place.

Complexity of Mission

Where it becomes complex is that in order to get these elements, you will have to address a multitude of interlocutors and be very organized because you will have to test a multitude of transactions. At the level of the interlocutors, the delivery note must be obtained from the logistics services, the invoice from the accounting or customer service, the order form with sales representatives, the proof of payment from the treasury etc… (although roles may vary depending on the company). It is a long and laborious job.

The Big 4 have evolved well in recent years and most have established service centres abroad where production of this type of time-consuming and time-consuming work can be completely outsourced. In my case, we are solicited a lot of these actors and it takes us off a lot of very boring tasks. This is a huge asset to the profession, especially as a young listener.

What are the different grades in audit?

Junior (2 years)

When we leave school, we’re hired as Junior 1. Every year, if your evaluations are good, you move to a new rank and your responsibilities and pay change accordingly. When you pass Junior 2, you will be able to do more technical work and start informally coaching interns and Junior 1. It was the hardest year for me. There was also a lot of turn-over on my main client’s team.

Senior (3 years)

Once you have passed Senior, your responsibilities evolve significantly and you become a pillar of the mission. You can manage from 2 to 5 Juniors every day. I would say that about 75% of your work is to produce, the rest is coaching. The Senior is in contact with the customer. We’re becoming a pillar for the team. When you pass Senior 2 and Senior 3, we work on sensitive points to audit. These points are often adjusted, as a result of agreements between the firm and the client. We must therefore be as good at the technical level as it relational.

Manager (at least 5 years before passing Partner, often more)

When you pass Manager, you are much less in production, and the latter will focus almost solely on the points complex or sensitive. The role of the Manager is to manage his team and ensure that Seniors properly manage their investigative perimeters. You don’t work directly with Juniors and interns. You are often in contact with the customer.

Partner or Partner

The Partner function is a very special function that differs very clearly from what the rest of the team can experience on a daily basis. The business relationship is an important part of the Partner’s daily life and is often quite distant from the operational realities of the field (at the team level). We rarely see him working alongside us.

What are the salaries in audit?

There are large differences in salary as a young graduate depending on the schools and location. I will say that Salaries for a school between the top 5 and the top 10 range from 35,000 euros to 38,000 euros. Young graduates of the top 5 schools will be paid up to 43,000 euros maximum. In general, about 10% increase per year is taken. The salary of a young graduate for the first years can give something like 38,000 euros as Junior 1 then 42,000 euros. Once Senior 1, we can expect 45,000 euros.

Once Manager, we must have a salary close to 60,000 euros. Generally speaking, gaps between schools tend to be erated over time.

Life after the audit

Where do the listeners go to after a few years in the trade?

Those who wish to continue to evolve in a demanding environment can go to advice (advice) Operational, Transaction Services or similar, in their firm or in another) or in General Inspection for Financial Services auditors. They can also leave as CFO, administrative or financial manager of a medium-sized structure.

Those who wish to flourish differently can join a beautiful CAC40 box in a financial direction to have a better balance between privacy and work life.

What do you like about this job?

I like contact with the customer. I talk to different teams: risk, legal, tax, management control, accounting… People who start auditing are usually young and motivated to work seriously. It’s nice to work with people of the same age group. You can also change sector and customer fairly easily. Salary growth is also interesting. Last point, the audit resells itself easily enough to change the profession if you do not want to make a career there.

In the negative side, there is always the possibility to come across a client that interests you less or in a less pleasant team. The work is limited to financial audit. Even if we can make recommendations, you’re not supposed to advise your client. You don’t work on understanding the business model or the market.

Firms also use experts when subjects become (very) technical, such as when, for example, valuing complex financial products. It is a shame because these are interesting points, and even if we keep a look at these points in fine, it is not we who carry out the work in detail on these topics.

Thanks to you!

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