I often get asked the question: What do auditors do on a daily basis? As an external auditor working in a midsize regional firm over the last few years, I can say that there are quite a few different tasks that auditors do in a given day, week, month, and year. Of course, depending on the size of the firm, the clients being served, and the level of skill or position of the auditor, these jobs may very greatly. However, I’d like to give you a small peak into several of the types of tasks an auditor might do as part of their job description.
Differences Between an External Auditor and an Internal Auditor
It is important to understand that there are more than one kind of auditor. Two main types of auditors include external auditors and internal auditors. External auditors conduct audits for many different companies, while Internal auditors work within one specific company and audit that company continually.
External auditors work for a specific accounting firm or company which employees many other external auditors who then are assigned to audit specific clients in various industries. These firms have a portfolio of clients who have requested their services for a variety of reasons such as due to an audit requirement from various laws and regulations, or due to a request from a lender for an opinion on a company’s financials for example. These firms then send their team of auditors to these companies to conduct an audit.
Internal auditors on the other hand usually work for a specific company in a variety of different industries. The object of internal auditors is to review their own company to look for improvements and issues of compliance. This primarily relates to testing the internal controls of different departments within their company. Internal audit departments are usually found in larger corporations, rather than small individual businesses. Also, external auditors primarily focus on financial statement audits, but internal auditors also may work on operational and other type of audits within their specific companies.
The Role of An Auditor
The main job of an external auditor is to provide reasonable assurance that there are no material weaknesses caused by fraud, or error, that would cause a reasonable person reviewing the financial statements of a company, to make a bad judgement call based on that information. What does this mean in layman’s terms? It means that an auditor’s job is to review a company’s finances to observe and test whether the financial numbers provided by a company are being reported accurately. And if there are inaccuracies, to determine if these are simply caused by human errors, or if they are caused by means of fraudulent activities.
Types of Responsibilities
Some of the auditing tasks of an auditor might include:
- Discussing the main accounting processes and other key processes with the management team of a company. This also might include reviewing and testing internal controls of a company.
- Conduct fraud inquiries of key management officials, along with random individuals in the company
- Review financial statements for accuracy
- Select certain balance sheet accounts and income statement accounts to test, including making sample selections from populations of activity and reviewing back-up support
- Creating analytics for select accounts and transactions and reviewing the data
- Sending out confirmations to third parties to confirm balances related to cash, accounts receivable, debt, revenues, etc.
- Conducting Inventory Counts
Other tasks an external auditor may work on throughout the day:
- Helping with the planning process of an audit engagement (audit of a specific client)
- Those who are in senior or management level auditing positions might review the work of other junior auditors, mentor new associates, and teaching audit procedures.
- CPE (Continuing Professional Education) online and in person trainings related to updated accounting standards and procedures, accounting practices, and soft skills.
Specific Examples of Procedures That An Auditor Might Do In A Day
- Cash – An auditor might review the cash amounts being reported on the financial statements of a company and then send a third-party request to the banks that those companies are using to verify with them that the bank balance per the bank is the same as what the company is reporting.
- Inventory – An auditor might review a list of company inventory and select a handful of items from that list to review in the company warehouses. The auditor will then recount that inventory after company official counts to verify that the auditor counts are the same as the company counts. This is used as a means to understand whether inventory is being properly accounted for.
- Investments – An auditor might review the individual investment accounts of a company and recalculate what the values of those investments should be as of the fiscal year end date based on review of popular financial sites such as Finance.Yahoo.com.
- Debt – An audit staff might review the debt covenants of a bond issuance and ensure that those debt obligations and requirements are being met by the company.
- Expenses – A day in the life of an auditor might include reviewing legal fee invoices from a company and making sure that there are no contingent liabilities as of year-end.
- Control testing – Another task an auditor might do would include reviewing check disbursements and verifying that each check was signed by the authorized individuals per internal control procedures of a given company.
These are just a few of the many examples of different tasks that external auditors do in a day. The work of an external auditor is cyclical in that each year an auditor will review the next year of their clients’ financials and conduct similar procedures each time. However, depending on the size of the client, you may be working on that client for a few days, weeks, months, or the entire year. During this time auditors get exposed to quite a few different tasks, people, and systems that can give quite the variety to a day in the life. Depending on the firm, region, and position, these job responsibilities, procedures, and tasks will very significantly, however, these are a few good examples to understand what auditors really do!