What is an Auditor?

Also known as: External Auditor, Information Technology Auditor, Internal Auditor, Forensic Auditor, Public Auditor, Financial Auditor.

An auditor is someone who prepares and examines financial records. They ensure that financial records are accurate and that taxes are paid properly and on time. They assess financial operations and work to help ensure that organizations run efficiently.

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What does an Auditor do?

In addition to examining and preparing financial documentation and written reports, auditors must explain their findings. This includes face-to-face meetings with organization managers and individual clients.

An auditor typically does the following:

  • Examines financial statements to be sure that they are accurate and comply with laws and regulations
  • Computes taxes owed, prepares tax returns, and ensures that taxes are paid properly and on time
  • Inspects account books and accounting systems for efficiency and use of accepted accounting procedures
  • Organizes and maintains financial records
  • Assesses financial operations and makes best-practices recommendations to management
  • Suggests ways to reduce costs, enhance revenues, and improve profits

Many auditors specialize, depending on the particular organization that they work for. Some specialize in assurance services (improving the quality or context of information for decision makers) or risk management (determining the probability of a misstatement on financial documentation). Other auditors specialize in specific industries, such as healthcare. Some workers with a background in accounting and auditing teach in colleges and universities.

The four main types of auditors are:

Public auditors -
do a broad range of accounting, auditing, tax, and consulting tasks. Their clients include corporations, governments, and individuals. They work with financial documents that clients are required by law to disclose. These include tax forms and balance sheet statements that corporations must provide potential investors. For example, some public auditors concentrate on tax matters, advising corporations about the tax advantages of certain business decisions or preparing individual income tax returns. They review clients' financial statements and inform investors and authorities that the statements have been correctly prepared and reported. Some public auditors specialize in forensic accounting or investigating financial crimes, such as securities fraud and embezzlement, bankruptcies and contract disputes, and other complex and possibly criminal financial transactions.

Forensic auditors -
combine their knowledge of accounting and finance with law and investigative techniques to determine if an activity is illegal. Many forensic auditors work closely with law enforcement personnel and lawyers during investigations and often appear as expert witnesses during trials. Government auditors maintain and examine the records of government agencies and audit private businesses and individuals whose activities are subject to government regulations or taxation. Auditors employed by federal, state, and local governments ensure that revenues are received and spent in accordance with laws and regulations.

Internal auditors -
check for mismanagement of an organization’s funds. They identify ways to improve the processes for finding and eliminating waste and fraud.

External auditors -
are independent auditors that do not work for the company they are auditing. Investors, government agencies and general public companies rely on this type of auditor to present an unbiased and independent report.

Information technology auditors -
are internal auditors who review controls for their organization's computer systems, to ensure that the financial data comes from a reliable source.

How to become an Auditor

An auditor needs at least a bachelor's degree in accounting or a related field. Some employers prefer to hire applicants who have a master's degree, either in accounting or in business administration with a concentration in accounting. Certification within a specific field of accounting improves job prospects. For example, many auditors earn a professional accounting designation (e.g., Certified Public Accountant in the U.S., Chartered Accountant in Canada).

An auditor must be able to identify issues in documentation and suggest solutions. For example, public auditors use analytical skills in their work to minimize tax liability, and internal auditors do so when identifying fraudulent use of funds. Auditors must be able to listen carefully to facts and concerns from clients, managers, and others. They must also be able to discuss the results of their work in both meetings and written reports.

An auditor must pay attention to detail when compiling and examining documentation, and be able to analyze, compare, and interpret facts and figures, although complex math skills are not necessary. Strong organizational skills are important for auditors who often work with a range of financial documents for a variety of clients.

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Further Reading

  • Internal Auditor

    Internal auditors provide an independent and objective assessment of the effectiveness and efficiency of a company’s operations, specifically its internal control structure.

  • Types Of Auditing Careers

    As an auditor with your new CPA license in hand, you have a few options for finding a job.

  • So You Want To Be An Auditor?

    If you want the life of a professional auditor, be prepared! Know what you are getting yourself into.

  • Day In A Life Of An Auditor At A Big Four

    The following is a description of a busy season day as experienced by an Assurance Associate at one of the Big Four firms.

  • What An Auditor Does And Doesn’t Do

    An auditor gathers appropriate and sufficient evidence and observes, tests, compares and confirms until gaining reasonable assurance. The auditor then forms an opinion of whether the financial statements are free of material misstatement, whether due to fraud or error.

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