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Auditor: What It Is, 4 Types, and Qualifications

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Photo: Auditor Photo: Auditor

What does an auditor do?

An auditor is a person with the authority to examine financial documents, confirm their authenticity, and make sure businesses are following tax regulations. They guard companies against fraud, call attention to inconsistencies in accounting procedures, and occasionally provide consulting services, assisting firms in identifying opportunities to improve operational effectiveness. Auditors operate in a variety of roles across many sectors.

Recognizing an Auditor

Auditors evaluate financial processes and make sure businesses are managed effectively. Their duties include monitoring an organization’s financial flow from start to finish and ensuring its finances are appropriately accounted for.

An auditor’s primary responsibility in the case of public firms is to ascertain if financial statements adhere to generally accepted accounting standards (GAAP). To comply with this obligation, auditors examine financial documents, operational data, and accounting data for a company. They also meticulously record every process stage, creating an audit trail.

After finishing, the auditor presents their findings in a report that precedes the financial results. Regulatory agencies and business management may also get separate, confidential information. All public firms are required by the Securities and Exchange Commission (SEC) to have their books audited by independent external auditors regularly by established auditing protocols. The International Auditing and Assurance Standards Board (IAASB), a commission of the International Federation of Accountants (IFAC), establishes official processes.

Comparing Qualified and Unqualified Opinions

Typically, auditor reports come with an unqualified opinion. Without passing judgment or offering an interpretation, these statements attest to the company’s financial statements compliance with GAAP.

A qualified opinion, which indicates that the information presented is restricted in scope and the firm being audited has not adhered to GAAP accounting rules, is issued by an auditor if they cannot deliver an unqualified opinion.

In addition to providing a clear picture of a company’s worth to assist investors in making wise selections, auditors reassure prospective investors that a company’s finances are correct and in order.

Various Auditors

  • Organizations use internal auditors to conduct internal, unbiased, and independent assessments of the financial and operational aspects of their operations, including corporate governance. They report to top management with their findings and recommendations for improving the company’s operations.
  • Typically, external auditors collaborate with government organizations. Their responsibility is to offer unbiased, public comments about the organization’s financial statements and their accuracy and fairness in representing the organization’s financial situation.
  • Government auditors keep track of and examine documents from both public and private organizations that carry out operations that are subject to laws or taxes. Government-employed auditors ensure money is collected and disbursed in compliance with rules and regulations. They assess risk management, examine agency financial systems, and identify fraud and embezzlement.
    Law enforcement agencies utilize forensic auditors because they are experts in criminal cases.

Qualifications for Auditors

A Certified Public Accountant (CPA) license is a professional credential granted by the American Institute of Certified Public Accountants, and it is mandatory for external auditors employed by public accounting companies. These auditors must additionally get state CPA certification in addition to this qualification. The majority of states do need a CPA qualification in addition to two years of professional job experience in public accounting, while requirements can vary.

Internal auditor requirements are less stringent. While not necessarily required, internal auditors are urged to become CPA-accredited. Instead, it is sometimes acceptable to have a bachelor’s degree in a business-related field, such as finance, and the necessary experience and abilities.

Particular Points to Remember

Transactions that take place after the date of the auditors’ reports are not the auditors’ responsibility. Furthermore, they are not always needed to find every case of fraud or financial misrepresentation; the management team of a firm is mainly in charge of it.

The primary goal of audits is to ascertain if the financial statements of a business are “reasonably stated.” Stated differently, this implies that audits may not always cover sufficient territory to detect instances of fraud. To put it briefly, a clean audit does not ensure that a company’s accounting practices are entirely ethical.


  • Assessing whether financial statements adhere to generally accepted accounting standards is the primary responsibility of an auditor (GAAP).
  • By official auditing standards, the Securities and Exchange Commission (SEC) mandates that all publicly traded corporations conduct periodic inspections by external auditors.
  • Auditors come in a variety of forms, such as those employed by outside audit firms or by businesses on an internal basis.
  • An audit report’s final judgment may be qualified or unqualified.

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