Who is an Auditor?

The scene that you saw shows Maniram (played by Om Prakash), who is playing a role of a lender. Radheyshyam (played by Rajender Nath) walks into his office to check his accounts (hisaab kitab). This makes Maniram anxious and he starts begging the auditor to not look at his accounts or financial statements.

In this blog, Learning Perspectives will explore the meaning of an Auditor.

The job of an auditor entails scrutinizing financial statements to determine their accuracy. The auditor needs to follow all compliance and tax regulations to ensure that the financial statements are in order.

Broadly speaking, there can be three types of auditors, internal, external, and forensic auditors. Internal as the name suggests, these auditors are on the payroll of the company as they are hired by the company. Their job is to highlight deficiencies in the process so that smoother and more efficient processes can be adopted. External auditors are third-party auditors who visit the company from outside to check the accuracy of the financial statements.

Forensic Auditors- These auditors come in when they have to investigate suspicious activities that are related to embezzlement, fraud, tax evasion, money laundering, etc. They work in close proximity with legal agencies.

Auditors give both qualified and unqualified opinions. The unqualified opinion indicates that the financial statements are prepared in accordance with governing practices such as GAAP (generally accepted accounting principles) or IFRS (international financial reporting standards). They don’t provide any interpretation or judgment on the statements.

While in the case of qualified opinion, auditors, issue a statement indicating that the company has not maintained financial statements in accordance with GAAP or IFRS and the information that is provided by the client is limited in nature.