In any business, as simple as it may be. Audit methods are necessary whose objective is to achieve maximum transparency in relation to the company’s financial and economic policies. So before knowing types of auditors, the term audit must be known.
An audit is a process that is used to review a certain aspect of an organization. Audits can review financial transactions and the situation of a company. Other types of audits include audits to ensure that the organization complies with laws and regulations. As well as operational audits to examine the efficiency and effectiveness of a group.
During an audit, the auditor examines and collects all of the financial data from company transactions. Actually that occurred during the year, and assesses the data for consistency and authenticity. To become an auditor, you’ll need a lot of information about tax and accounting rules, as well as a lot of experience.
Different Types of Auditors
There are several types of auditors that perform these procedures. Different types of auditors are discussed below:
The traditional statutory audit, also known as financial audit or statutory audit, is carried out by external auditors. The role of an external auditor is to determine whether the books of accounts have been adequately managed. Whether the annual financial statements provide an accurate and realistic picture of the entity’s financial situation. An external auditor’s report is crucial because it includes the auditor’s assessment of the company’s integrity. Both stakeholders, including the general public, are given access to the annual financial statements and the auditor’s report. An external auditor’s opinion is unbiased and pure. Specifically for the purpose of determining whether or not a corporation is being truthful to its shareholders.
Internal auditors are employed by the organizations they audit. These auditors can review the performance of employees, compliance with company standards and financial and accounting systems. Internal auditors allow company leaders to be informed of what is happening within the company and to deal with problems or concerns in advance. The internal auditor then writes a report highlighting the issues and recommending remedies. Hence these are employees of the company’s management and are thus not considered independent auditors.
Government auditors are those auditors who review the finances and practices of federal agencies. These auditors work for the Government Accountability Office. The auditors in this office report their findings to Congress, which uses them to create and manage policies and budgets. In addition, most state governments have similar departments to audit state and municipal agencies.
Independent auditors do not work for the government or the organization that is being audited. These auditors review the financial statements of a company, municipality, agency or district. In fact to determine if the statements and reports are accurate and fair. Independent auditors help prevent organizations from issuing misleading financial information.
In most cases, internal and government auditors are sufficient to manage and supervise the internal functioning of the organizations they review. However, independent auditors, who have no connection to the company being audited, help to see errors and erroneous data that can lead to fraud. This is especially important for investors who rely on accurate financial reports to make good investment decisions.
More From Business Study Notes:- Tax Audit
Financial reports and transactions that may be related to fraud or illegal activity are audited as part of forensic auditing. During legal trials, forensic auditors are also expected to read their reports in court. A bachelor’s degree in accounting, as well as coursework in investigative or criminal law, is required to work as a forensic auditor. So, if your organization suspects fraud, it’s time to employ a forensic auditor. He’ll look at all of the accounting processes and books of accounts. As well as put in place new protections to deter fraud, embezzlement, and financial disputes.
A tax auditor examines the financial statements to see if they are eligible under the tax laws. A tax audit is done to verify the integrity of your company’s income tax returns. In addition, a tax auditor guarantees that you haven’t under- or over-estimated your tax obligation. Nor that you haven’t lost out on any significant tax cuts. To practice tax auditing, an individual must have a bachelor’s degree as well as a CPA license.
Characteristics of an Auditor
Although there are exceptions as in everything, in the first place, the audit must be developed according to the standards that are accepted by agreement in a generalized manner.
Taking into account the Business Laws, the provisions of the Companies Act, the Commercial Code, the PGC and the standards developed by the Accounting and Audit Institute should be taken as reference.
- The auditor will issue an audit report of having effects on third parties on the financial statements of the company. Actually that are based on the investigation carried out as an analysis, following the precepts described above.
- In addition, it should be noted that the Law considers that this type of audits must be carried out by a qualified professional that is independent from the company without any interest to it. Also must use appropriate review and verification methods.
However, as we said in the previous points, as a result of social economic development, the audit has been divided into different classes depending on the object of study and the techniques that will be used to perform the analysis.
Also many companies still consider the audit as something negative, a report to fear, the reality is very different. The auditor is a key professional who can help improve economic performance in business processes, increasing productivity and efficiency.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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