In this article, you will find an answer to the question, "Who is an auditor and what are their duties?" If you are not sure about what career path to choose, we are going to help you to make the right choice.
While every company is obliged to prepare financial statements, they are supposed to be checked on the government request on the compliance with the tax policies. Examination of the financial statements and other documentation of the company belongs to the auditor’s responsibility.
Who is an auditor?
An auditor, or CPA (Certified Public Accountant), or CA (Chartered Accountant) is an independent professional who performs audits, ensure the reliability and accuracy of the financial information provided in financial statements prepared by the directors of the company. An audit can also be requested by the third parties that would like to be engaged in business with the firm. A qualified Chartered Accountant’s job is to give a professional and unbiased opinion about the company’s affairs.
How to become an auditor?
Auditors are obliged to finish studies not only in an ordinary college or university but the American Institute of CPAs. Only an auditor is allowed to perform audits of the companies as he is required to pass a test conducted by the American Institute of Certified Public Accountants (AICPA) and get a license issued by this institution.
What professional skills, qualifications, and knowledge are required to become an auditor?
Why the auditor’s job is considered attractive is because it is usually well-paid. If you are familiar with finance, have extensive experience in the field of economics, finance, and accounting, you may try yourself in the role of a financial auditor. However, it is not easy to do auditor’s job. A good auditor needs to possess a bunch of professional knowledge, skills, and qualifications.
As for the professional skills, an auditor should be knowledgeable in financial legislation, preparation of business documents, various production processes of the company, financial software, SFAS (Statements of Financial Accounting Standards) rules and other. A desirable auditor’s skills include speaking a foreign language, computer literacy, ability to quickly identify errors and violations in the financial documentation, presentation skills, attention to detail, thoroughness, objectivity and so on. Some of the most crucial auditor qualifications include legal compliance, corporate finance, SFAS (Statements of Financial Accounting Standards) rules and other.
As mentioned above, auditor’s job is well-paid, but it is quite difficult, especially, for the beginners. It may be stressful, time- and effort consuming. Auditors can work either for the government, private organisations or run their private practice. Another reason to choose this career path is that it features an increasing demand in the labour market, so you would never stay without work if you have gained a degree in this field.
What are the duties of an auditor?
In the beginning, organisations relied only on an accountant who assisted in keeping records, prepared the journal entries and wrote the annual financial statements. A small company does not necessarily need to perform an internal examination of its activity. Big companies, however, often lack a more sophisticated investigation of its records.
Increased demand in independent auditors has arisen during the last decade. Due to the new requirements, every company has to be audited every year. An auditor is a new accountant, but he doesn't work for the company which means that he is on the opposite side of the barricade.
Big organisations usually have their internal auditors; however, they are also subject to an independent examination performed by an independent specialist, an external auditor. An external auditor is asked to complete the similar tasks as an internal professional, but he is usually hired by a third party or a government institution to ensure the internal auditor financial reports are independent and unbiased.
What does an auditor do?
When talking about what are the everyday duties of the auditor, his services can be divided into three main groups related to the following areas of finance:
The primary responsibility of an external auditor is to report to the company staff. The report must answer the question of whether, according to the auditor, the financial reports and statements include truthful information about the financial situation of the company’s affairs.
Among the other essential auditing procedures and day-to-day duties of the auditor are:
- Conducting the performance and financial audit investigations;
- Verifying the company’s assets and liabilities by checking the documentation and transactions of the company, financially related records, annual reports and financial statements, tax documentation, and verification of its correctness;
- Checking whether the company prepares the financial documentation based on the laws and regulations, and the records and reports are faithfully and properly kept;
- Making conclusions on the results of the check of books and records;
- Understanding, examining and appraising some of the management controls, policies, practices, and activities reflecting the financial situation of the organisation;
- Performing analytical procedures on the company’s account balances and transactions;
- Assessing the company’s financial transactions, the possible risks and management controls. An auditor has not only to review the financial books and records for quality but also to check for the mistakes in the company’s transactions;
- Assisting more experienced auditors in detecting the areas of potential risks;
- Monitoring some processes and procedures when they are performed;
- Asking the company representatives and accountants a range of formal and informal questions in a written or oral form about the company’s activity;
- Performing written conversations with debtors to confirm the amount of the company’s debt;
- Preparing final audit reports after completing audit tests, communicating audit findings in it in an unbiased view;
- Completing audit questionnaires;
- Discussing results with the company directors, managers, and accountants;
- Developing the recommendations to correct the actions of the company and improving its business processes;
- Offering new policies and procedures, enforcing adherence to requirements, suggesting needed actions;
- Updating audit programs and questionnaires;
- Maintaining professional knowledge by attending educational seminars, classes, workshops, reading professional publications in finance, accounting, management.
At the final stage of the audit examination, the auditor may also give a piece of advice to the company’s financial managers and directors for maximising its performance and efficiency. The primary goal of an auditor is to make sure that the financial statement and other documentation don’t contain any errors. The thing is every audit is unique as it depends on the current situation of the company. Even if an auditor is performing the same procedures, the examinations may differ depending on the scope of work, size, the age of the company, the correctness of the information provided in the reports, etc.
READ ALSO: Supermarket business plan in Nigeria
What an auditor doesn't do
While an auditor has a lot of responsibilities and powers, there are, however, some things an auditor is not allowed to do or just cannot. Here is what auditors don’t do:
- Check every letter and figure in the balance sheet, financial report, and other documentation. An audit is about performing selective tests only;
- Change source documentation;
- Plan company’s actions, decide on internal controls;
- Check and reveal an opinion on the appropriateness of the company’s activities, strategies, internal controls, and decisions;
- Prepare financial statements on behalf of the managers or directors;
- Conduct transactions on behalf of a client,
- Conduct meetings with the board of directors;
- Change accounting policies and procedures;
- Check every operation and activity conducted by a company;
- Recruit or dismiss the employees;
- Prepare an organisation for audit;
- Reveal the results of the investigations to shareholders on the directors’ and managers’ activities, procedures and so on.
This list does not include all the nuances. There are some things auditors cannot do. For example, auditors cannot take responsibility for the results of the check of the financial reports, records and other documentation on which they form an opinion. It applies only to external auditors. One cannot expect the auditors to take responsibility for the audit results because they are supposed to be independent examiners. Auditors do not belong to the management team which means that the responsibility for financial statement presentation lies only in the hands of the organisation being audited.
How is the audit conducted?
An audit is performed by an independent body and aimed at the determination of the current financial position of the individual, company or organisation. It is an official examination of the financial information included in the balance sheet, annual reports, and other documentation. An audit also implies the review of the financial statements of the company including:
- An income statement
- A statement of changes in equity
- A cash flow statement, and others
The goal of a financial audit examination is to form a fair opinion on the quality of information presented in the financial reports at a given date.
When performing an audit examination, an auditor is obliged to follow auditing standards established by the governmental fiscal institutions. After completing an audit, an auditor writes an audit report, in which he explains what he has done and gives his opinion on the company checked. Generally speaking, all the companies are required to undergo an external audit once a year. However, only non-profit organisations are not subject to an examination.
When an audit is to be conducted, the company's accountant prepares an annual financial report. It is vital that the reports and other documentation be prepared following reporting standards. The next step is to approve the internal financial report which belongs to the organisation's managers and directors duties. It is crucial that an auditor maintains independence from the company management to make an unbiased opinion on the company’s activity.
An audit has typically two goals. First, to determine whether the financial managers have done everything possible to ensure the accuracy of the financial report. Second, to gain an understanding of the company's activities during the reporting period and evaluate the risks that might influence the company’s financial situation as well as the measures, or controls undertaken by the company to lower the risk. Auditor has to make a judgement on the accuracy of the financial information, the financial results and assess their compliance with financial reporting standards.
Advantages and disadvantages of an auditor's job
Auditor’s job has both advantages and disadvantages. On the one side, it is a prestigious and high-paid job. On the other hand, it is not easy to be an auditor because this job implies possessing advanced skills and qualifications.
- Increasing demand in the labour market;
- High earnings.
When talking about the advantages of the auditor job, the best thing about it is that you can communicate with many people, make essential acquaintances and so on.
Another advantage is that you don’t have to an external auditor from the very beginning but start with the career of an internal auditor. This way, you will be able to develop your professional skills gradually.
- A lack of stable working schedule;
- No right to make a mistake during the auditing;
- A massive amount of information to process;
- Frequent and long trips;
- High requirements to the job candidate who needs to have appropriate operational experience in the field.
When talking about disadvantages, they are probably few but significant. If you are aiming at becoming an auditor, you need to have a strong desire to work in the field of finance and accounting. This job implies performing various complicated tasks in a short amount of time and with no mistake. Those who are not stress resistant will probably find this job quite a stressful one.
What is the difference between an accountant and an auditor?
Many confuse the auditor and accountant jobs as they seem to be similar. In reality, they differ to a great extent. While every auditor can be an accountant (bookkeeper), this does not apply to the accountants as they mostly perform less complicated tasks. The truth is both careers belong to the field of accounting, but the duties, the salary of these professionals are different.
An accountant is doing a lot of calculations, prepare financial statements, annual reports, balance sheets that is why his work is quite monotonous. An auditor is required to conduct complicated tasks too, but they are more related to detecting fraud, mistakes and analysing the company’s performance. That is true that the auditor’s job is quite prestigious. The auditors get more money for performing their duties. The point the accountant job implies fewer responsibilities, but it is in lower demand.
According to glassdoor.com, in 2019, an average salary of an external auditor will start at N116,000 and reach around N10,450,000 per year depending on the company.
Now you know to the question "Who is an auditor?" To summarise, an auditor has to express an opinion on whether the accountant has included in the financial statement and annual report fair information about the company’s activity. To make his opinion about the company’s performance, the auditor needs to gather appropriate and sufficient evidence by conducting tests, questionnaires, checks, and so on. An auditor has to form an opinion about whether the financial statement and annual report are free of fraud, technical errors.
In conclusion, we’d like to say that the career of an auditor is quite prestigious but demanding. It gives many opportunities for making high earnings, constant development and even travelling around the world. While auditor’s career requires putting a lot of effort into it, it is worth trying to gain experience in this field.