Meaning of Auditor
An auditor is defined as a person appointed by a company to perform an audit. He is required to certify that accounts produced by his client companies have been prepared in accordance with normal accounting standards and represent a true and fair view of the company. Usually,Chartered Accountants are appointed as auditors. An auditor is a representative of the shareholders,forming a link between government agencies,shareholders,investors and creditors.
Role of Auditors
The role of auditors who are expected to certify the veracity of accounts maintained by companies for the benefit of all stakeholders of the company including fair and transparent governance leaves a lot to be desired. Instances are galore where obliging auditors have helped companies falsify accounts and in window-dressing for small monetary gains.
Types of Auditors
There are three types of auditors, Namely:
1. Internal Auditors:
These are employed by the organization for which they performs audits. Their responsibilities vary and many include financial statement audits, compliance audits and operational audits. They may assist the external auditors in completing the financial statement audit or perform audits for use by management within the entity.
Internal auditors must have no operating involvement in activities they audit. An organization may have a small or very large internal audit staff. They cannot be independent as long as the employer-employee relationship exists. Independence is often accomplished by giving the highest ranking person in internal auditing the status of Vice President and having that person report directly to a committee of the Board of Directors.
2. Independent Auditors:
These are usually referred to as CPA (Certified Public Auditors) firms. The opinion of an independent auditor about financial statements makes the statement more credible to such users as investors,bankers,labour unions,government agencies and the general public.
3. Government Auditors:
These work in various local,state and federal or central Government agencies performing financial,compliance and operational audits. For example: local and state governments,employ auditors to verify that business collect and remit sales taxes and excise duties as required by law.
Duties of an Auditor
The duties of an auditor are defined under Section 227 (1A) of the companies Act 1956. It says that an auditor can enquire:
- Whether loans and advantages made by the company on the basis of security have been properly secured.
- Whether transactions of the company which are represented merely by book entries are not prejudicial to the interests of the company.
- Whether loans and advances made by the company have been shown as deposits.