Conducting external audits is often mandatory for companies under the law or standards. However, companies may also perform these audits for other parts of their business or specific purposes. These entail obtaining the services of an auditor. Companies must understand the type of auditor they need to conduct audits. Before discussing these types, it is crucial to know who auditors are.
Who is an Auditor?
An auditor is a professional or a firm that performs an audit. During this process, they use their knowledge, skills, and experience to perform their work under set criteria or standards. Auditors use a predefined process involving examining various records, documents, or evidence. Based on their work, auditors also report on whether the subject matter meets the specified criteria.
Auditors can conduct various types of audits based on their experience and knowledge. Similarly, these professionals have the qualification to conduct audits under the law. Auditors may also be members or associates of a professional body that regulates the accounting and auditing profession. However, the requirements for who may conduct an audit differ from one jurisdiction to another.
What are the different types of Auditors?
Auditors can perform most types of audits. However, some may have a specialization in one field or another. Based on the area of work, auditors may get classified into different types. Some of these types are as below.
External auditor
An external auditor is an independent professional or firm hired by a company to examine its financial statements. The word auditor often gets associated with these types of auditors. Usually, external auditors follow specific rules and procedures set forth by auditing standards. Due to the scrutiny involved with their work, external auditors follow more strict rules and regulations compared to others.
Internal auditor
An internal auditor is an individual or firm responsible for conducting internal audits. Their work varies from one company to another. However, internal auditors examine internal processes, procedures, and methodologies. Their work covers internal controls, risk assessment, compliance checks, etc. Internal auditors also follow auditing standards. However, their work involves less scrutiny.
Forensic auditor
Forensic auditors usually conduct investigative work. They investigate specific matters to report findings to a judge or law enforcement authorities. Usually, they check for fraud or criminal issues within a company or client. Forensic auditors require more specialization in their field of work. However, they do not follow the same standards.
Government auditor
A government auditor is a specialist in conducting audits of federal and government agencies. Similarly, they work for the Government Accountability Office. Government auditors also follow a different procedure compared to external and internal auditors. Government auditors are usually government employees and report directly to Congress or other similar bodies.
Tax auditor
A tax auditor examines taxpayers’ records and documents for tax purposes. The primary duty of this auditor is to assess whether the taxpayer is eligible to pay tax under the law. Usually, tax auditors are professionals who check the accuracy of the income tax returns filed by a taxpayer. These auditors can be external, internal, or government employees.
Conclusion
An auditor is a professional or firm responsible for conducting audits. Based on their work, they may fall under different types. Usually, people associate the word auditor with internal and external audits. However, they may also include forensic, government, tax, and other types of auditors.
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Read excerpts from columns that appeared in April, May and June 2024 in FP Comment. This in the second instalment in a series
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