Auditor: Definition & Overview

KEY TAKEAWAYS

• An auditor’s job is to determine whether a business’s financial statements follow the generally accepted accounting principles or GAAP.
• There are a number of different types of auditors including internal, external, government, and forensic. 
• All public companies are required to engage external auditors to review their financial statements.
• A judgment of an audit or audit opinion is either qualified or unqualified.

What Is an Auditor?

An auditor is a person that reviews financial information and verifies that the company has adhered to a particular standard in which the entity has prepared the information. They are responsible for reviewing and verifying authenticity and accuracy. Financial statement standards could be GAAP (Generally Accepted Accounting Principles), tax law, or internal policies that the company has set.

People often think of being audited as a negative. On the contrary, auditors help to protect businesses from a number of risks, including financial fraud. They also help to identify any shortcomings in a  company’s accounting methods or internal controls. 
On occasion, auditors may work as consultants, helping to identify ways to boost operational efficiency and strengthen financial processes to ensure accurate and reliable financial statements. An auditor may work in various capacities within a number of different industries.

What Are the 4 Types of Auditors?

There are four different types of auditors:

1. Internal Auditors

An internal auditor is hired by an organization to provide an in-house evaluation of business operations. 

2. External Auditors

External auditors  may work with government agencies or ensure financial information meets the criteria set by a financial accounting regulatory body. Their job is to provide an opinion on an organization’s financial statements. 

3. Government Auditors

Government auditors will primarily act as external auditors to various government entities to ensure that they are adhering to financial policies and financial statement standards enforced by regulatory bodies.  Other government auditors will work in the area of tax compliance to ensure individuals and businesses are following legislated tax law.

4. Forensic Auditors

A forensic auditor specializes in identifying if a financial crime or fraud has taken place. They are often used by law enforcement agencies. Sometimes forensic auditors are hired by companies to identify if fraud has taken place.  Financial audits performed by external auditors are not designed to specifically detect fraud, but it can be a result. So an organization may engage a forensic auditor to establish proof that there have been instances of fraud.

Summary

Auditors are important financial regulators. They may be thought of as a negative entity but this is far from the truth. They can greatly help businesses who are struggling with their bookkeeping, as well as help protect them from financial fraud. 

Written by Grant Gullekson

Grant Gullekson is a CPA with over a decade of experience working with small owner/operated corporations, entrepreneurs, and tradespeople. He specializes in transitioning traditional bookkeeping into an efficient online platform that makes preparing financial statements and filing tax returns a breeze. In his freetime, you’ll find Grant hiking and sailing in beautiful British Columbia. Learn more about Grant’s services at viccityaccountant.com.

Written by Grant Gullekson

Grant Gullekson is a CPA with over a decade of experience working with small owner/operated corporations, entrepreneurs, and tradespeople. He specializes in transitioning traditional bookkeeping into an efficient online platform that makes preparing financial statements and filing tax returns a breeze. In his freetime, you’ll find Grant hiking and sailing in beautiful British Columbia. Learn more about Grant’s services at viccityaccountant.com.