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The Importance of Auditors

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Accountants and auditors follow companies’ money, ensuring a business accurately and truthfully records and reports its financial operations. Accountants handle the day-to-day recording, analysis and reporting of an organization’s financial transactions. Those transactions include the recording of income, payments, payroll and tax deductions as well as the annual reconciliation of the company’s books. Auditors are generally highly trained accountants who carefully examine a company’s financial records for accuracy and review a company’s accounting methods and procedures to help the company avoid fraud and theft.

Auditors require training in all types of accounting practices as well as tax laws, regulations and compliance processes. According to the U.S. Bureau of Labor Statistics (BLS), a bachelor’s degree in accounting or a related field is typically the minimum educational requirement for becoming an auditor. Earning a Certified Public Accountant (CPA) license “may improve job prospects” and is a requirement for every accountant who files reports with the Securities and Exchange Commission (SEC).

Many auditors choose to earn additional professional certifications, such as the certified internal auditor, certified in control self-assessment auditor, certified information systems auditor and certified government auditing professional. Other auditors go on to earn an MBA in accounting, often specializing in services such as assurance and risk management or in certain industries like manufacturing, healthcare, pharmaceuticals or law enforcement. Some professionals with backgrounds in accounting and auditing teach at colleges and universities.

The following are several types of auditors, each with different duties and responsibilities.

Internal

Internal auditors work for the companies they audit. At large corporations, internal auditors work in accounting departments, where they double-check staff accountants’ work. The primary duties of an internal auditor are to review and assess a company’s policies, procedures and records as well as a company’s performance based on its plans, policies and procedures. The duties of an internal auditor include reviewing financial records and accounting systems, reviewing compliance with company policies and evaluating the efficiency of company operations. Their duties may also include reviewing employee performance and assessing progress toward company goals. Internal auditors typically report to the board of directors’ audit committee.

Richard Chambers, former president and CEO of The Institute of Internal Auditors, uses the analogy of a vehicle’s navigation system, saying that “internal audit is a critical component of an organization’s navigation system.” Chambers explains that internal audit demonstrates its value by “providing assurance that the organization is progressing on the course charted by management and the board,” in addition to offering corrective recommendations and identifying and alerting management and the board of compliance risks and failures.

External

External auditors share some of the duties of an internal auditor, but they do not work directly for the organizations they audit. They review a company’s financial statements and inform management, the board, investors and authorities whether the statements accurately reflect the current financial situation of the company. And they determine if those statements have been correctly prepared and reported. External auditors often work on a project-by-project basis.

Government

Government auditors maintain and review the records and practices of government agencies and audit private businesses and individuals whose transactions are subject to government regulation or taxation.

Forensic

Forensic auditors and accountants examine and evaluate firms’ or individuals’ financial documents for use as evidence in court cases involving fraud, embezzlement or other financial claims. Forensic auditors often give expert testimony during trial proceedings.

Procurement

Procurement review auditors analyze a company’s purchasing practices, processes and systems, determining whether the company really needs the goods and services they buy. Procurement review auditors can help a business save money and run more efficiently.

ESG

Environmental, social and governance (ESG) regulations, reporting standards and transparency laws are quickly gaining traction worldwide, including recent proposed rule changes by the SEC. As new regulations and standards develop, organizations must anticipate them and rapidly adapt to changes. Increasingly, a corporation’s ESG policies and actions also play key roles in brand reputation and public opinion development. Hence, specialized internal auditors focused on ESG issues are becoming more essential for modern organizations.

Information Technology

Information technology auditors focus on the security and controls of an organization’s computer systems to ensure that the financial data come from a reliable source. According to BLS, IT auditors are generally internal auditors.

Job Outlook for Auditors

Employment of auditors and accountants is projected to grow 7% by 2030, according to the BLS. Accountants and auditors held nearly 1.4 million jobs and made a median annual wage of $77,250 in May 2021.

Interestingly, BLS notes that while technological advancements in AI, cloud computing and automation will disrupt accounting practices, taking over many routine tasks like data entry, the overall demand for accountants will remain the same. BLS explains that “the advisory and analytical duties of accountants will become more prominent,” meaning more engaging work for auditors with education and experience focused on more than crunching the numbers.

Learn about the University of West Florida online MBA in Accounting program

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