An auditor is a person who is qualified, appointed and authorized to check and verify the books of accounts and financial statements prepared by an organization. The auditor ensures that all facts and figures are accurate and have been prepared in compliance with tax laws.
There are various types of auditors depending on the kind of work they are appointed to do, including internal, external, government and forensic auditors. To make sure that the records have been prepared in accordance with the requirements of GAAP, an auditor will check the audit trail, which includes the operations of the business, its accounting data and its financial records.
An auditor is tasked with checking and verifying the books of accounts maintained by an organization. They also ensure that all prevalent accounting practices and methods are being followed by the organization. They help to identify fraud and suggest ways to correct the errors and prevent further fraud from taking place. Auditors function in various roles within an organization.
Types of auditors
Various types of auditors are:
- External auditors: External auditors are usually appointed in the case of public companies. Their scope of work mainly involves examining the financial statements of the organization and ensuring that they are accurate and represent a true and fair view of the operations and financial status of the company. The auditor also has to give their unbiased and objective public opinion of the same.
- Internal auditors: They are hired and appointed by the organization to provide objective and independent assessments of their operations and financial transactions. They function in an in-house capacity and are also tasked with ensuring and analyzing corporate governance. Their reports are addressed mainly to the management of the organization with suggestions on how to improve operations and financial health.
- Government auditors: Government auditors assess and prepare the financial records of government organizations and private organizations that operate according to government regulations. Their main duty is to make sure that government income is being received and utilized according to the applicable laws.
- Forensic auditors: Forensic auditors are employed by law enforcement agencies in situations involving crime.
How auditors work
Auditors mainly track and evaluate the financial operations of organizations and ensure that they are being managed in the right way. They help track the cash flows from start to end and verify that every bit of it is properly accounted for.
Auditors have different roles based on the type of company they work for. If an auditor is appointed to a public organization, they will have to ensure that the financial statements conform to the GAAP or generally accepted accounting principles. According to the requirements of the Securities and Exchange Commission (SEC), a public company must be audited only by an independent and external auditor.
To make sure that the records have been prepared in accordance with the requirements of GAAP, an auditor will check the audit trail.
Checking an audit trail involves examining the trial of accounting data from start to finish. Once the auditor is done with his checks and verifications, he then writes his report on his findings. This is the first page of the financial statements. The auditor may also provide private reports to the authorities and to the company’s management as well.
Auditor’s report – qualified and unqualified opinions
An auditor’s report will either have their qualified or unqualified opinion. In most cases, the opinion will be unqualified. This means that the organization’s financial statements have been prepared in accordance with the requirements of GAAP. Hence, there is no need for any additional interpretation or call for information.
If the auditor is not able to verify that the financial statements have been prepared according to the requirements of GAAP and if the information given to them is limited, then the report will contain a qualified opinion.
The auditor’s report is crucial in helping investors make investment decisions regarding a company. It assures potential and existing investors that the financial information contained in the statements is correct and that the finances of the company are in good health along with its operations.
