The term financial auditor is often used interchangeably with an accountant, but the two careers have notable differences. A financial auditor ensures that a company's financial statements are in good order and in compliance with generally accepted accounting principles (GAAP). Financial auditors and accountants perform similar tasks in terms of the review of financial data, but auditors are more focused on discovering fraud or error in corporate financial documents.
- A financial auditor is responsible for ensuring that a company's financial statements are in good order and in compliance with generally accepted accounting principles (GAAP).
- Though often grouped together, the role of an auditor and accountant have distinct differences.
- Financial auditors use analytical skills to assess a company's accounting and financial reports by testing the documentation of transactions that the company has provided.
- In addition to a bachelor's degree, a financial auditor must often hold a Certified Public Accountant (CPA) designation.
- Unlike corporate accountants, financial auditors do not reconcile accounts, nor do they make accounting entries for an organization. Instead, they provide the information necessary to correct errors and accounting fraud.
Generally Accepted Auditing Standards (GAAS)
Financial Auditor Job Description
A financial auditor reviews a company's financial statements, documents, data, and accounting entries. Financial auditors gather information from a company's financial reporting systems, account balances, cash flow statements, income statements, balance sheets, tax returns, and internal control systems. The information is then reviewed and used to present all financial data relating to a specific organization in an accurate, fair manner, ensuring that no fraud or gross errors are present in the company.
Financial auditors speak with multiple departments, including low- and high-level management teams, accounting and finance personnel, and company executives in their pursuit of analytical data. These discussions focus on gaining an understanding of the company's purpose, operations, financial reporting systems, and known or perceived errors in its organizational systems. Financial auditors conduct interviews of key personnel to comprehend what accounting and finance tasks are taking place, and which tasks, policies, or procedures may need to be established or implemented more efficiently.
On a day-to-day basis, financial auditors use analytical skills to assess accounting and financial reports by testing the documentation of transactions that the company has provided. The analysis also includes observation of inventory and the processes used for managing inventory counts. Additionally, financial auditors review accounts receivable, invoices, vendor payments, and billing procedures to ensure compliance with accounting guidelines.
The information gathered from a financial auditor's analysis is used to develop recommendations and specific action items for the organization where an audit was performed. Financial auditors often suggest changes to internal controls and financial reporting procedures to enhance the company's efficiency, cost-effectiveness, and overall performance.
In some instances, they must attest to the information presented through the audit. This attestation represents a stamp of approval for the company's accounting procedures and financial reporting systems. However, financial auditors do not take responsibility for the company's accounting practices or discovered errors.
Unlike corporate or management accountants, financial auditors do not reconcile accounts, nor do they make accounting entries for an organization. Instead, they provide the information necessary to correct errors and accounting fraud to accounting or other finance personnel. They also do not implement changes to accounting or finance policies or procedures in a company.
Education and Training
A financial auditor position often requires at least a bachelor's degree in accounting or finance, although some companies desire a Master's in Business Administration (MBA) with a focus on finance or accounting. Practical experience in accounting or finance fields is also a requirement of most companies hiring financial auditors. Experience in the field may be gained from in-school internships, industry volunteering, or entry-level accounting or finance positions with a focus on research analysis.
In addition to education and experience requirements, a financial auditor must often hold a Certified Public Accountant (CPA) designation. Earning a CPA designation involves extensive study of accounting practices and reporting standards, in addition to passing a rigorous four-part examination. After successfully completing the exam, individuals must meet continuing education requirements as laid out by their state of residence or licensing.
The CPA designation is not the only credential financial auditors can earn to enhance their career trajectory. Financial auditors with practical work experience can qualify to take the Certified Internal Auditor (CIA), Certified Government Auditing Professional (CGAP), or Certified Financial Services Auditor (CFSA) exams. Each of these designations has its own education, experience, and continuing education requirements.
A financial auditor must possess certain skills. For example, they must identify issues with financial documentation with accuracy and speed and should feel comfortable presenting recommendations to company executives and accounting personnel based on their findings. Additionally, a financial auditor must analyze information from a wide range of financial statements.
Another handy attribute is advanced and effective communication skills, as a financial auditor must gather much information from company employees and executives. A financial auditor must pay close attention to detail when auditing information and should have a high proficiency in mathematics. Finally, a financial auditor is most successful when also in possession of advanced organizational skills and other soft skills like being personable and likable.
Financial Auditor Salary and Job Prospects
According to the Bureau of Labor Statistics (BLS), the median average annual wage for financial auditors in 2020 was $73,560; however, this figure includes median salary information for accountants, as well. According to Glassdoor, the average annual salary for an auditor in the United States was a bit lower at $66,310, with a low end of $42,000 and a high end of $104,000, but those with senior-level financial auditor positions with management responsibilities or those who observe auditing, accounting, or finance departments in a company could earn salaries well into the six figures.
According to the Bureau of Labor Statistics, accountants and auditors will experience a 4% growth in employment between 2019-2029, the average for all occupations,
The environment where a financial auditor works has a direct impact on their annual salary. Smaller, boutique companies that employ financial auditors do not pay as much as larger, corporate organizations. Financial auditors who work independently on a consulting basis or as sole proprietors may earn more than auditors employed with a company since they often do not qualify for fringe benefits.
What an Auditor Does FAQs
What Does an Internal Auditor Do?
An internal auditor is responsible for reporting to upper management their assessment of the company's compliance and risk management programs, as well as how on track the company is to achieve its financial goals.
What Does an External Auditor Do?
An external auditor is hired by a company to inspect the company's financial records and report whether the financial statements are presented fairly in accordance with the applicable accounting standards, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
What Does an Auditor Do in a Bank?
A certified bank accountant is responsible for reviewing and evaluating a financial institution's records to ensure accuracy, completeness, and compliance with relevant rules and regulations.
Who Gets Paid More Accountants or Auditors?
There is a broad range in salary for both accountants and auditors. Auditors may have a slight advantage because their position sometimes requires more experience than an accountant, however many factors, especially the size and clientele of the company the accountant or auditor works for, other than the title of the job determine the difference in total compensation,