Auditors and Accountants
What is the Difference Between Auditors and Accountants?
While accountants and auditors both work in the accounts and financial statement of companies and enterprises, they have different job responsibilities and goals. Accountants are more concerned with daily tasks, such as processing financial information, paying the company’s bills and balancing the books. The position of auditor is higher than that of an accountant. Someone in this role may review the work of a company’s accountants to ensure that it is correct. They are responsible for testing internal controls to determine if they are adequate to prevent errors and monetary loss for the company.
The types of reports that are issued by accountants and auditors are also different. Accountants are responsible for preparing tax forms, presenting management with budget proposals and working on aging accounts receivable reports. Auditors study these reports as a whole and present errors and discrepancies to management. They tend to look at their organization as a whole, while accountants are more involved in detailed transactions. Accountants typically remain in the office to complete their duties. Auditors may travel to other locations to review older reports. The bottom line difference between the two occupations is that accountants work with current fact and figures, while auditors are most concerned with work that has already been completed.
What Do Accountants Do?
The primary duty of an accountant is to prepare financial records and ensure that they are correct. Some of the specific duties of an accountant include the following:
- Maintenance of accounting records and other company records
- Prepare company’s financial statement for both the management and the public.
- Make sure that the company’s financial statements comply with state and federal laws.
- Make recommendations to management on ways to decrease costs and increase income.
- Prepare reports to explain their findings to upper management.
- Maintain good relationship with the company’s bankers, tax authorities, auditors, government agencies and other interested parties.
What Do Auditors Do?
Inquiring of management and others to gain an understanding of the organization itself, its operations, financial reporting, and known fraud or error
- Evaluating and understanding the internal control system
- Performing analytical procedures on expected or unexpected variances in account balances or classes of transactions
- Testing documentation supporting account balances or classes of transactions
- Observing the physical inventory count
- Confirming accounts receivable and other accounts with a third party
- At the completion of the audit, the auditor may also offer objective advice for improving financial reporting and internal controls to maximize a company’s performance and efficiency.
What auditors don’t do
For a clear picture of the role of external auditors, it helps to understand what you should not expect auditors to do. The emphasis is on “independent.”
First and foremost, auditors do not take responsibility for the financial statements on which they form an opinion. The responsibility for financial statement presentation lies squarely in the hands of the company being audited.
Auditors are not a part of management, which means the auditor will not:
- Authorize, execute or consummate transactions on behalf of a client
- Prepare or make changes to source documents
- Assume custody of client assets, including maintenance of bank accounts
- Establish or maintain internal controls, including the performance of ongoing monitoring activities for a client
- Supervise client employees performing normal recurring activities
- Report to the board of directors on behalf of management
- Serve as a client’s stock or escrow agent or general counsel
- Sign payroll tax returns on behalf of a client
- Approve vendor invoices for payment
- Design a client’s financial management system or make modifications to source code underlying that system
- Hire or terminate employees
This list is not all-inclusive. But, in short, the auditor may not assume the role and duties of management.
In practical terms, there are a number of tasks you should not expect your auditor to perform.
- Analyse or reconcile accounts
- “Close the books”
- Locate invoices, etc., for testing
- Prepare confirmations for mailing
- Select accounting policies or procedures
- Prepare financial statements or footnote disclosures
- Determine estimates included in financial statements
- Determine restrictions of assets
- Establish value of assets and liabilities
- Maintain client permanent records, including loan documents, leases, contracts and other legal documents
- Prepare or maintain minutes of board of directors meetings
- Establish account coding or classifications
- Determine retirement plan contributions
- Implement corrective action plans
- Prepare an entity for audit
Your external auditor may perform some of these duties at an additional fees. This is because it is a different assignment.
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