How Does an Auditor Spend a Workday?
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About Auditors
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Auditors may work for a government agency like the Internal Revenue Service or the General Accounting Office, one of the big five accounting firms or as independent contractors. Almost all auditors in the United States are Certified Public Accountants. Their primary job is to verify the accuracy of financial reports. They do this by examining documents that support financial transactions, including income and expenses, tax deductions, depreciation and aging of assets and investments like stocks and pension funds. Organizations and corporations also conduct internal audits to validate their financial records and to discover errors.
Some auditors specialize in conducting specific kinds of audits. Corporations, nonprofit organizations and charities, small businesses and individuals may be audited. Auditors perform their work at the location of the business or individual that is being audited or in their own offices. This decision usually depends on the audit requirements and the type of documents that need to be reviewed.
Audit Preparation
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An auditor generally informs the person or business entity about the audit in advance in order to provide the auditee with the opportunity to identify and collect the required documents. The auditor uses financial statements, annual reports or tax forms to prepare the request for documents.
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Audit Steps
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The first task for auditors is to determine if the auditee's financial transactions and procedures conform to Generally Accepted Accounting Principles. The most commonly requested documents for any audit are bank statements and receipts for expenses. However, auditors can and do request additional documents at the time of the audit. They often request written procedures for financial transactions, forms used to capture financial transactions and correspondence related to transactions. The auditor may start by examining bank statements to identify specific income and expenditures. The auditor then requests invoices for income items and receipts for expenses. This process may take a few hours, an entire day or longer, depending on the size of the company's accounts or number of transactions.
Identification and validation of income and expenses is followed by validating the procedures for initiating, recording and reporting these items in the financial statements or reports. The auditor must also determine if any major errors or omissions were made in the calculation of all income or expense amounts included in the auditee's financial statements. Next, the auditor determines if the expenses and income have been assigned to the correct categories, in accordance with GAAP or the regulatory agency that has requested the audit. To complete an audit, the auditor must also review expenses to analyze whether they are reasonable, allowable (depending on type of audit) and allocable, based on the organization or company's budget guidelines.
Audit Reports
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During each of these steps, the auditor may request additional records that document the transaction's accuracy and validity, the internal procedures for managing the transactions and the people involved in completing the transactions. The auditor will then complete an audit report. It will detail how the audit was conducted, when the audit occurred and whether the financial records of the person, organization or company contained significant errors, omissions or flaws in record keeping. The auditor summarizes these findings in a written opinion about the validity of the audited financial reports.
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