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Recommended textbook solutionsHuman Resource Management15th EditionJohn David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine 249 solutions
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Human Resource Management15th EditionJohn David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine 249 solutions
Information Technology Project Management: Providing Measurable Organizational Value5th EditionJack T. Marchewka 346 solutions What Is an Auditor?An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency. Auditors work in various capacities within different industries. Key Takeaways
AuditorUnderstanding an AuditorAuditors assess financial operations and ensure that organizations are run efficiently. They are tasked with tracking cash flow from beginning to end and verifying that an organization’s funds are properly accounted for. In the case of public companies, the main duty of an auditor is to determine whether financial statements follow generally accepted accounting principles (GAAP). To meet this requirement, auditors inspect accounting data, financial records, and operational aspects of a business and take detailed notes on each step of the process, known as an audit trail. Once complete, the auditor’s findings are presented in a report that appears as a preface in financial statements. Separate, private reports may also be issued to company management and regulatory authorities as well. The Securities and Exchange Commission (SEC) demands that the books of all public companies are regularly examined by external, independent auditors, in compliance with official auditing procedures. Official procedures are established by the International Auditing and Assurance Standards Board (IAASB), a committee of the International Federation of Accountants (IFAC). Unqualified Opinion vs. Qualified OpinionAuditor reports are usually accompanied by an unqualified opinion. These statements confirm that the company's financial statements conform to GAAP, without providing judgment or an interpretation. When an auditor is unable to give an unqualified opinion, they will issue a qualified opinion, a statement suggesting that the information provided is limited in scope and/or the company being audited has not maintained GAAP accounting principles. Auditors assure potential investors that a company’s finances are in order and accurate, as well as provide a clear picture of a company’s worth to help investors make informed decisions. Types of Auditors
Auditor QualificationsExternal auditors working for public accounting firms require a Certified Public Accountant (CPA) license, a professional certification awarded by the American Institute of Certified Public Accountants. In addition to this certification, these auditors also need to obtain state CPA certification. Requirements vary, although most states do demand a CPA designation and two years of professional work experience in public accounting. Qualifications for internal auditors are less rigorous. Internal auditors are encouraged to get CPA accreditation, although it is not always mandatory. Instead, a bachelor's degree in subjects such as finance and other business disciplines, together with appropriate experience and skills, are often acceptable. Special ConsiderationsAuditors are not responsible for transactions that occur after the date of their reports. Moreover, they are not necessarily required to detect all instances of fraud or financial misrepresentation; that responsibility primarily lies with an organization's management team. Audits are mainly designed to determine whether a company’s financial statements are “reasonably stated.” In other words, this means that audits do not always cover enough ground to identify cases of fraud. In short, a clean audit offers no guarantee that an organization’s accounting is completely above board. Who is primarily responsible for the financial statements?The preparation and presentation of a company's financial statements are the responsibility of the management of the company. Published financial statements may be audited by an independent certified public accountant. In the case of publicly traded firms, an audit is required by law.
Who is responsible for a public company's financial statements?The Sarbanes-Oxley Act of 2002, section 302, “Corporate Responsibility for Financial Reports,” requires the CEO and CFO of publicly traded companies to certify the appropriateness of their financial statements and disclosures and to certify that they fairly present, in all material respects, the operations and ...
Who is responsible for ensuring that the financial statements are prepared?Directors prepare financial statements, audit committees monitor the integrity of financial information. Auditors audit the financial statements and perform other procedures on other parts of the annual report. Auditors report various matters to the audit committee.
Who is responsible for audit and what is the main role?An auditor is an authorised personnel that reviews and verifies the accuracy of financial records and ensures that companies comply with tax norms. Their primary objective is to protect businesses from fraud, highlight any discrepancies in accounting methods, among other things.
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