What Does An Auditor Do? Duties And Responsibilities
By Indeed Editorial Team
Published 22 November 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Auditors are professionals who audit a person or company's financial transactions and accounting procedures. Legal parameters make it mandatory for companies to participate in audits to prevent irregularities and avoid discrepancies. If you are interested in becoming an auditor, you may benefit from knowing what their job role entails. In this article, we examine what an auditor does, the qualifications and skills required to become one and how much they make.
What does an auditor do?
If you are considering a career in finance, you may want to understand the answer to "What does an auditor do?". An auditor is a certified accounting professional who verifies the financial statements and records of individuals and companies. They check whether companies comply with taxation and legal guidelines. Auditors identify discrepancies, highlight accidental or deliberate misrepresentation of financial data and protect companies and financial institutions against fraud. The primary duties of an auditor are:
Monitoring the accounting processes of an organisation
An auditor periodically monitors and inspects a company's accounting books to verify that they are accurate and comprehensive. They periodically compute tax liability and calculate tax returns. They work with professionals from various departments to ensure compliance with prescribed financial norms and protocols. If they encounter frequent errors, or suspect fraud in relation to accounting procedures, they may report to senior management or government officials to find suitable remedies.
Complying with auditing guidelines
The National Financial Reporting Authority prescribes standards and guidelines for auditors to follow while conducting audits. These guidelines make the auditing process easier, faster and more accurate. They also help accounting and finance departments of companies in identifying prescribed standards and the best accounting practices.
Preparing an audit report
An audit report evaluates a company's financial position. Auditors prepare an audit report based on a company's financial statements, including balance sheets, profit-and-loss accounts, and cash flow statements. They oversee maintenance of accounting systems, books, ledgers and prepare audit reports in a fair manner.
Verifying protocols for borrowings and lending
Small and medium-sized companies lend and borrow money for investment and capital expenses. An auditor verifies if the companies have secured the loans with proper documentation and collateral. Improper transactions related to lending and borrowing activities can incur penalties, judicial scrutiny and cancellation of licences.
Giving honest opinion of a process
Regulatory bodies require auditors to prepare unbiased reports for all auditing procedures. An auditor can give an 'unmodified opinion' or a 'clean report', if they find transactions and financial processes in order. This adds credibility to a company's financial position and credit standing. If the auditor doubts the accuracy of financial statements or does not have the required information to conduct an audit, they may give a 'modified opinion'.
Reporting fraud and helping investigation
The purpose of an audit is to identify errors, omissions and irregularities, and an auditor reports such cases to concerned regulatory bodies. Apart from reporting, they also cooperate with regulatory authorities and forensic auditors to investigate the intent of possible wrongdoings. They may also provide information regarding auditing procedures and submit reports to investigating authorities.
Different types of auditors and their roles
An auditor's role comes with a significant amount of responsibility and risk. Their work affects the credibility and reputation of companies. Auditors may work in specific domains like compliance, regulation, law and taxation. These are four types of auditing roles:
1. Government auditors
Central and state audit agencies employ auditors to work with government agencies, bureaucratic departments, ministries and private business entities. The primary goal of a government auditor is to ensure that institutions properly account for their expenses and income, as per regulatory requirements. Auditors assess whether government departments are ready for audits by reviewing their financial statements and internal audit reports. They also conduct performance and compliance audits to identify operational irregularities and productivity issues within departments.
2. Internal auditor
The board or the management of a company may hire an internal auditor to review and audit its internal functions. Some companies may hire experienced auditors from auditing companies to work as internal auditors on a contract basis. They scrutinise financial records and documents to ensure legal and regulatory compliance. They may identify methods to improve a company's processes and suggest steps to reduce expenses and wastage of resources.
3. External auditor
An external auditor may be an independent contractor or part of an auditing company. Companies hire them to conduct annual audits for specific departments or for the entire company. Though external auditors work with a company's internal auditors, they may not allow internal stakeholders of a company to interfere with or influence their auditing processes.
4. Forensic auditors
Regulatory bodies appoint forensic auditors to obtain evidence from companies charged with financial malpractice. Central and state-level judicial bodies can accept a forensic auditor's reports as valid evidence. Forensic auditors investigate various aspects of financial fraud and submit reports to a concerned regulatory body. They may conduct audits for both government and private institutions.
How to become an auditor
Auditing careers attract a sizable number of candidates, as they offer stability and good earning potential. Auditors can become independent consultants after gaining a few years of experience. Follow these steps to become an auditor:
1. Graduate from higher secondary school
Choose the commerce or accountancy stream in 10+2 with a focus on subjects like economics, business studies and mathematics. This provides a good knowledge base and can help you develop an understanding of the fundamental concepts of accounting. Colleges may not specify prior knowledge of accountancy practices in their admission criteria for a bachelor's degree programme in accounting.
2. Pursue a professional degree in accounting
Companies may recruit candidates with bachelor's degrees for entry-level auditing roles and prefer candidates with a master's degree for senior auditing roles. Specialised auditing companies send external auditors to clients and prefer hiring candidates with postgraduate qualifications in accounting, finance or management. If you are interested in becoming an auditor, you may consider pursuing the following academic qualifications:
B.Com (Bachelor of Commerce) in Auditing
B.Com in Taxation
B.Com Honours in Direct and Indirect Taxation
B.Com in Accounting and Taxation
B.Com in Tax Procedure and Practice
MBA (Master of Business Administration) in Banking and Taxation
MBA in Finance
M.Com (Master of Commerce) in Accounting and Auditing
M.Com in Accounting and Taxation
M.Com in Taxation
3. Enrol for certification courses
Apart from formal academic qualifications, you can also pursue specialised certification programmes to stay updated on the latest auditing procedures and industry-specific regulations. Governments can modify financial regulations and tax laws often and certificate programmes and diplomas try to incorporate the latest developments in an industry. You can pursue these certifications if you are interested in becoming an auditor:
Diploma in Tax and Company Law
Diploma in Taxation
Diploma in Accounting and Auditing
Diploma in Internal Auditing
Diploma in Forensic Auditing
Post Graduate Diploma in Tax Management
Post Graduate Diploma in Accounting
Post Graduate Diploma in Tax Management
Advanced Diploma in Financial Accounting and Taxation
Advanced Diploma in Taxation
4. Gain work experience
You can gain initial work experience through internships. Auditing firms recruit interns and trainees to assist their core auditing teams in performing routine functions and preparing documentation. You can apply for entry-level auditor roles in companies with the right qualifications and a few relevant internship experiences. You may require a few years of work experience to gain promotions and advance to a senior auditor role.
5. Develop relevant skills
If you are interested in becoming an auditor, consider developing these skills:
Analytical skills: Auditors work with large volumes of data and may prepare a variety of financial and legal documents routinely. The ability to analyse extensive amounts of information and generate inferences is a useful skill for an auditor.
Organisational skills: Auditors benefit greatly from keeping their documentation, resources, tools and workspaces organised at all times. Maintaining finance, tax and legal documentation is a core responsibility in this line of work and auditors with organisational skills can navigate their duties comfortably.
Communication skills: Auditors interact with clients, managers, executives, company owners and government authorities on a routine basis. They benefit from being able to communicate complex finance and accounting concepts in terms that a wide audience can understand easily.
Numerical skills: Although complex numerical capabilities may not be necessary while working with computers, auditors benefit from being able to analyse, compare and remember numbers and figures accurately.
Attention to detail: Auditors perform accurate work documentation to help their clients understand financial situations in detail. They pay attention to crucial details in financial records to prevent companies from overspending resources or mismanaging their finances.
How much does an auditor make?
The average base salary for an auditor is ₹22,159 per month. This figure can increase significantly with higher academic credentials, specialised skills and a few years of industry experience. The average base salary of a senior auditor is ₹6,17,039 per year.
Salary figures reflect data listed on Indeed Salaries at time of writing. Salaries may vary depending on the hiring organisation and a candidate's experience, academic background and location.
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