Auditor: Types, Responsibilities, and Roles in Businesses

Who is an auditor?

An auditor is a professional who reviews and verifies the financial records of a business to ensure accuracy and compliance. They protect businesses from fraud and point out discrepancies in accounting. 

What tasks do they perform?

Auditors study the financial records of a company to ensure that all funds are accounted for by tracking the entire cash flow. They also assess the financial statements of public companies to check for compliance with generally accepted accounting principles (GAAP).

To do this, auditors perform what is known as an audit trail, which is a systematic way of tracing financial data back to its source. This involves carefully analyzing accounting data, financial records, and other aspects of the business. The auditor then presents their findings in a report, which is typically attached to the financial statements. They may also provide a private report to the company’s management.

In addition to assessing compliance with GAAP, auditors also assess the potential risks that could affect the organization. Auditors look at both internal and external factors and provide recommendations for mitigating risks.

Auditors provide unqualified opinions (meaning a judgment saying a company’s financial statements are fair and accurate) along with their reports if they find that the company’s financial statements comply with GAAP. They provide qualified opinions if they find that the information provided to them is limited or does not follow GAAP. 

Types of auditors

Internal auditors are employed by the business and provide independent in-house evaluations of financial records, operational business activities, and corporate governance. These findings are then reported back to the company’s senior management. Auditors are specialist accountants, and most need a certification or license to practice. However, internal auditors don’t need a Certified Public Accountant (CPA) license which is awarded by the American Institute of Certified Public Accountants (AICPA). Having a bachelor’s degree in finance or other business fields along with some relevant experience is usually expected.

External auditors are usually certified by a state agency. They work independently of the company they audit but may be working for government agencies and tasked with making sure that business and individual financial statements and records comply with tax laws. External auditors who work for public accounting firms need a CPA license and state CPA certification along with two years of work experience in public accounting. These requirements may vary. 

Forensic auditors investigate financial crimes such as fraud or embezzlement. They work with law enforcement. 

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