What does an external auditor do?

The

external auditor is a third -party professional who performs an independent review of the organization's financial records. Generally, the Committee for Audit of Managers of the Company and evaluates accountants, pay and purchasing records, as well as anything related to financial investments and loans, looking for any mistakes or fraud. It then provides an accurate, impartial report on the financial situation of the company for administration or to those who are responsible for corporate ethics. External and internal auditors usually do a similar job, although internal review is generally more focused on risk management and internal control procedures.

Internal vs. external auditors

An independent financial expert performs work for the organization, but it is not employed. On the other hand, the internal auditor works for the organization he controls. Both parties provide similar services, including the evaluation of financial statements, business operations of compliance with regional rules and also offer their views on the efficiency and finding of fraud. InTermore examiners generally have the advantage of understanding industry or characteristics specific to society, but to know that audited people can interfere with their judgment.

Advantages and disadvantages of using external auditors

The external auditor did not develop relations within the organization he controls, helping him avoid bias. They have strict requirements about this: external auditors generally cannot be a friend or relative of any owner, manager or employee. Those who review publicly traded companies must not hold shares or have any stock share in any of their subsidiaries or shares.

While the external auditor can specialize in specific areas of business, they often have to learn inputs and outputs a particular audit. Although it may be a disadvantage, it also means that it is unlikely to do to workHe entered with any ideas of how things should be done. This can make it easier for him to recognize problems.

Auditor's selection

The organization can rely on an internal or external auditor or use a combination of both services depending on its needs and law. In the United States, the 1934 Securities and Exchange Act requires publicly traded companies to hire an external party. This expert, which is selected by the Committee, must ensure that the financial statements precisely display the financial performance of the company, because public investors often rely on this information when purchasing shares. Private companies may or may not use an external professional, but if so, it is usually only in situations where they are obliged to do so by law or because of a major event such as merger.

In some cases, third party regulations or shareholders who believe the company's financial demands are required. If the AUDItor finds evidence to support their suspicion, is usually obliged to report them. In general, society has the opportunity to prevent its position either in writing or orally.

Planning

Audit planning is a formal process that the auditor must perform before the actual examination. He must first prove that he has work knowledge of business and his operations. It must also identify the risks associated with incorrect reporting of the financial statements for this particular entity and then develop an approach based on the results of the previous two steps. The whole control process can last anywhere from weeks to months, depending on things like the size of the organization and the risk of reporting.

Audit standards

Most countries have organizations that set standards for financial auditors. Experts usually follow generally accepted audit standards (GAAS), which testify to their training, independence and care. International Audit (ISA) standards issued by the Council for International Auditors' andThe gear standards (IAASB) are also enforced in many countries, including all members of the European Union. In the US, the Council for Supervision of Accounting Company (PCAOB) is supervised by public companies (PCAOB) and sets standards.

Although these instructions have, there are times when the auditor has to rely on his own experience to draw some conclusions. He is trained to challenge the truth about the material he encounters to find errors and fraud and identify areas that require improvement. For example, it might notice that the company could be more efficient in its accounting, internal inspection or expenditure habits. It can propose solutions such as reducing overhead costs through a reduction in employees or better inventory control.

irregularity

More problematic are irregular abstraction that are incorrect authorities or lies from the client. They can become many ways, including when the company manipulates its financial performance. This can state in a mislead of investorsAnd it may force the company to grant unlawful negotiations, recalculate past profits and delay the publication of future financial performance if discovered. Another type of irregularity is related to the classification assigned to the positions of a company that affects the way employees are paid.

To find irregularities and to avoid supervision, independent reviewers create tests during planning to locate errors or fraud. The higher the risk of errors in financial reporting, the greater the depth of the test and the less external partner relies on the official entry of the company for accuracy.

findings

Upon completion of the work, the external auditor will present its findings to the leading or board of the company. His report usually includes the status of accounts due and receivables, as well as his / her illustration systems keeping the company records and financial health. His comments on these topics are expected to be constructive and include recommendations for improvements.

findingThe auditor strongly affects the reputation of society. There may be serious consequences if its conclusions about assets, debts, tax obligations and payments do not correspond to companies. In the US, the auditor must assign an evaluation to the client, from "unqualified", which means acceptable to "unfavorable", suggesting that the company distorts its financial performance. These assessments often affect whether the company can remain in business.

qualifications

Most jobs in this area require the applicant to be a certified public accountant (CPA), indicating in the US that he passed a uniform CPA test and is a licensed professional. In other countries, this work is carried out by authorized accountants. Experience with an audit, financial analysis or Busminses Administration is also valuable for anyone who plans to go to this field.