An auditor inspects company financial statements. They ensure that the firm complies with Generally Accepted Accounting Principles (GAAP) and tax regulations. They prepare detailed audit reports comprising conclusions and best practice suggestions.
Audits correct accounting errors and expose frauds. Moreover, thorough auditing discourages malpractices from occurring in the first place. Auditors gather evidence to back their conclusions. Aspiring candidates can attain a bachelor’s degree in business, finance, or accounting. The demand for auditing is increasing and, therefore, is a lucrative career option.
- Auditors are qualified professionals who analyze firms’ financial records to detect misrepresentations or discrepancies if any. They ensure business’ compliance with various tax laws and regulations.
- Audits could be internal, external, governmental, forensic, or technological.
- On top of degree qualifications, aspiring candidates can get certified as public accountants (CPA). In the US, audit professionals average around $63524 every year.
What does an Auditor do?
Auditors verify the authenticity of financial statements. They gather evidence for material transactions. The aim is to deduct possible misstatements and frauds. Moreover, thorough audits discourage malpractices from occurring in the first place.
Audits can be internal or externals. Internal audits are conducted by the in-house personnel, whereas external audits are conducted by independent professionals. Audits focus on GAAP compliance of financial statements. Once the audit is completed, an audit report is released to the management. The audit report comprises conclusive analysis and recommendations.
Auditor Responsibilities and Duties
The responsibilities of an auditor are as follows.
- Planning: Auditors make audit plans to complete the workload efficiently. They follow a systematic approach from start to finish.
- Reviewing Financial Statements: They inspect details mentioned in the financial statements.
- Documentation: They record the material issues and findings as soon as they detect them.
- Collecting Evidence: After going through the accounts, they make conclusions. But they also gather evidence to support their claims. They inspect material proof to inspect the authenticity of financial statements.
- Examining Internal Controls: An internal audit checks the efficiency of internal control systems and management policies.
- Checking Legal Compliance: Regulations keep changing; therefore, ensuring legal compliance is a crucial function of an audit.
- Issuing Audit Report: Based on the evidence, these professionals formulate a detailed report. The report comprises conclusions, observations, root-cause analysis, and best practice suggestions.
Auditors are legally bound to fulfill the following duties:
- Interrogate the Facts: Auditors must ask questions to the authorized person to gather evidence that can corroborate facts and figures mentioned in the financial statements.
- Give Unbiased Opinion: They should make reliable statements and disclose the details without being partial to the firm.
- Confine with Audit Standards: They should comply with the audit standards set by the government and regulatory bodies.
- Report Fraudulent Practices: They must expose any misrepresentation or inaccuracies found in the financial records.
- Follow Professional Code of Ethics: They must uphold ethical codes—confidentiality, integrity, competency, and objectivity.
Aspiring candidates must possess the necessary educational and statutory qualifications as prescribed by domestic law. Aspirants can attain a bachelor’s degree in business, finance, or accounting. Then they can go for a Certified Public Accountant (CPA) certification provided by the American Institute of Certified Public Accountants (AICPA). Further, they can secure an advanced (master) degree in accounting, business, finance, or other associated fields to become an expert.
Practical knowledge of accounting software used by the organization is an added bonus. Audit professionals must keep up with the changes and development in auditing. Also, they must have a good understanding of business operations pertaining to the specific organization. This is crucial for collecting evidence.
Having a degree is not enough. Apart from the qualifications mentioned above, aspiring candidates must possess the following traits to become successful in the field of auditing.
- Knowledgeable: Professionals must be familiar with the various accounting policies, laws, statutes, and concepts.
- Tactful: They should be problem solvers—deal with serious issues during the audit process.
- Reliability: A lot of trust is put on the audit report considering that it is prepared by a highly skilled professional.
- Integrity: They must be assertive and should not succumb to any undue influence.
- Independent: There is a level of subjectivity involved in interpreting data. Audit professionals must be able to work alone—with very little assistance.
- Analytical Skills: It all boils down to judgment calls. Audit professionals must thoroughly inspect the financial records.
- Confidentiality: They are trusted with sensitive information and must maintain discretion, divulging information only when required by law.
Types of Auditors
The types of auditors can be differentiated based on their service and appointment:
#1 – Internal Auditors
Companys’ in-house employees conduct internal audits. They are responsible for establishing proper internal control systems and formulating measures to prevent fraud and compliance issues. In-house audit personnel report directly to top-level management.
#2 – External Auditors
External audit professionals do not serve a particular firm. Instead, they are independent external parties who provide an impartial audit report to the shareholders, investors, general public, and government agencies.
They must comply with the auditing procedures set forth by the International Federation of Accountants (IFAC) committee and the International Auditing and Assurance Standards Board (IAASB).
#3 – Government Auditors
The government authorities appoint professionals to inspect the financial records of publicly funded programs. Further, they help the government with budgeting and cost analysis. They track the government revenue and expenditure to ensure compliance.
#4 – Forensic Auditors
Law enforcement agencies appoint forensic auditors to conduct a detailed analysis of financial records that are suspected of possible fraud.
#5 – Information Technology Auditors
An IT audit reviews the efficiency of a firm’s technological infrastructure—software, systems, cyber law compliance, and data security.
An audit is a huge responsibility—stakeholders, public, and government authorities rely on audit reports. Aspiring candidates need financial knowledge and the ability to draw meaningful conclusions out of financial records. It is a good option for an individual with a keen eye for detail.
The global economy is on the rise—businesses are expanding—the demand for auditing is increasing. For many businesses, periodic audits are mandated by law. Therefore, auditing will never become obsolete.
According to a 2022 Indeed report, auditors in the US average around $63524 every year. Professionals with less than a year of experience average $59015 a year. Those with ten or more years of experience earn around $77092 a year. DISYS rewards talents by going as high as $219706 per annum, whereas USAA parts with as much as $173867 every annum. The US Air Force offers audit professionals $114770 annually.
Frequently Asked Questions (FAQs)
Aspirants can pursue a bachelor’s or master’s degree in accounting, business, finance, and similar fields. The certified public accountant (CPA) license is essential for bachelor’s degree holders. Once recruited, professionals are liable to report inaccuracies and fraud if and when encountered.
In-house employees are usually hired by the firm’s directors, while external professionals are appointed by the company’s shareholders or by government authorities.
The very objective of an audit is to unfold discrepancies and misrepresentations in financial records. Therefore, professionals must report misstatements to the concerned authorities.
This has been a guide to who is an Auditor and its meaning. Here we explain the responsibilities and duties of an auditor along with their types, skills, salary, types, and qualifications. You can learn more about auditing from the following articles-