Auditors dictate whether financial statements follow generally accepted accounting principles (GAAP). There are various types of auditors, including ones hired to work in-house for companies and others who work for an outside audit firm.
Additionally, auditors track cash flow from beginning to end and verify that an organization’s funds are accounted for properly. Afterward, an auditor’s findings are listed in a report that appears as a preface in financial statements. Separate, private reports may be submitted to company management and regulatory authorities.
What is an Auditor?
An auditor reviews and verifies the accuracy of financial records. They also ensure that companies comply with tax laws. Other things auditors do are protect businesses from fraud, point out discrepancies in accounting methods, and occasionally work on a consultancy basis. By working in this manner, they can help organizations find ways to boost their operational efficiency.
What is an Auditor’s Primary Responsibility?
An auditor’s primary responsibility is to assess financial operations and ensure that organizations run efficiently. Also, they are responsible for handling daily claims activities to determine instances when businesses do not meet obligations. Or analyze where a facility has under- or over-performed based on the contract requirements. Additional duties of an auditor include:
- Calculating taxes owed and preparing tax returns
- Inspecting accounting books and systems for efficiency and proper accounting procedures
- Using existing auditing platforms to study claims and ensure adequate funds for each claim
- Working with the compliance manager to ensure they bill and administer claims following health insurance requirements and legal framework
- Identifying persistent claims error trends and alerting management about them
- Suggesting ways to reduce costs, improve accounting systems, and work more efficiently
What Are the Various Types of Auditors?
|Internal auditors||Internal auditors provide in-house, independent, and objective assessments of financial and operational business activities (including corporate governance). They report findings to senior management, which includes tips on how to run the business better.|
|External auditors||External auditors work along with government agencies. They must provide an objective public opinion regarding the organization’s financial statements and if they fairly and accurately represent the organization’s financial position.|
|Government auditors||Government auditors maintain and view records of government agencies of private businesses or individuals conducting activities related to government regulations or taxation. They detect embezzlement and fraud, analyze agency accounting controls, and gauge risk management. Auditors who are employed through the government guarantee revenues are received and spent according to laws and regulations.|
Which Auditors Collaborate with Government Agencies?
Government auditors collaborate with government agencies. They maintain and analyze records of government agencies and of private businesses or individuals performing activities regarding government regulations or taxation. Other ways government auditors assist government agencies are by detecting embezzlement and fraud, analyzing agency accounting controls, and evaluating risk management.
What are the Auditor Qualifications?
There are two types of auditors (internal and external). External auditors working for accounting firms need a CPA license. Additionally, these auditors have to obtain state CPA certification. Requirements vary, but most states demand a CPA designation and two years of professional work experience in public accounting.
The qualifications for internal auditors are less stringent. Internal auditors are encouraged to get CPA accreditation, but it is not always mandatory. A bachelor’s degree in subjects such as finance and other business disciplines, combined with appropriate experience and skills, is often acceptable.
What Skills Do Auditors Need?
Auditors need a mix of hard and soft skills to succeed. Some of the most relevant and crucial ones are:
Auditors have to recognize issues in documentation while proposing appropriate and effective solutions. That means professionals have to review documentation and analyze the company’s processes to identify issues that may lead to liabilities. Then, auditors can suggest areas for improvement.
Strong organizational skills are crucial since auditors often work with various financial documents for multiple clients. Maintaining documentation and paperwork is essential to ensure accuracy and efficiency while on the job.
Auditors work closely with their clients, so communication skills are beneficial. Professionals have to carefully listen to clients, managers, and other stakeholders regarding facts and concerns. Moreover, auditors have to be able to discuss the results of their work in written reports and meetings.
Complex math skills are not necessary, but auditors must know how to analyze, compare, and interpret facts and figures. Knowledge of statistics and accounting are required to complete these tasks.
Attention to Detail
Professionals have to be accurate in their work and documentation to help clients avoid penalties and clearly comprehend potential liabilities. For this reason, auditors need to be detail-oriented individuals who accurately compile and study documentation and other financial statements.
What is an Auditor’s Report?
An auditor’s report is a written letter from an auditor with their opinion on whether a company’s financial statements comply with GAAP. It is important since banks, creditors, and regulators require an audit of a company’s financial statements. There are clean and adverse audit reports. Clean audit reports mean a company followed accounting standards, while unqualified reports mean there might be errors. An adverse report shows financial statements may have had discrepancies, misrepresentations, and did not adhere to GAAP.
An auditor’s report consists of three paragraphs:
- The first paragraph states the responsibilities of the auditor and directors.
- The second paragraph contains the scope, declaring a set of standard accounting practices as the guide.
- The third paragraph possesses the auditor’s opinion.
Sometimes, additional paragraphs are created to inform the investor of the results of a separate audit on another entity’s function. An investor will focus on the third paragraph, which states the opinion.
How much is the Salary of an Auditor?
Salaries for auditors depend on the individual’s level of education, experience and skills and the position’s specific job responsibilities. Geographical location also substantially impacts earnings. The common salary in the United States is $68,172 per year. Salaries can range from $16,000 to $143,000 per year based on the position and job duties. Internal auditors often make the most money because they have to protect a company’s assets via risk management tools and skills.
What Courses Should I Take to Become an Auditor?
To become an auditor, you should take courses in math, computers, accounting, and economics in high school. After receiving your high school diploma, you will need to attend a college or university to get a bachelor’s degree in accounting, finance, economics, or business. During this period, take classes focused on auditing, finance, and data analytics. Some universities that offer auditing courses are Bradley University, DePaul University, and Eastern Michigan University.
Who can Serve as an Auditor?
Anyone who goes to school and completes the appropriate courses and gains credentials can serve as an auditor. Since auditors play such a huge role in financial statements and assessing a business’s efficiency, they must possess the qualifications needed to complete daily tasks.
Where does a Typical Auditor Work?
A typical auditor works in an office environment. However, some professionals work from home or a remote area occasionally. Some auditing work also means professionals have to travel to a client’s place of business. While they complete most of their work individually, auditors sometimes have to work in teams with others.
Most auditors work full-time, with some working over 40 hours per week. They also are busier and work longer hours during important parts of the year (tax season or at the end of the budget year).
Is a CPA Certification Required for an Auditor?
A CPA certification is required for external auditors. Other auditors do not have to get it. But, they are encouraged to get it since it offers a considerable advantage in the job market. Many employers seek auditors with a CPA, and having this certification allows an auditor to show their professional competency. The American Institute of Certified Public Accountants offers the CPA certificate. To achieve it, you must pass a four-part national exam while meeting other state requirements. Almost all states require CPA candidates to complete 150 semester hours of college coursework. However, a few will accept several years of public accounting experience to substitute for a college degree.