5 Things to Know About Auditing

There are many different career options for students who choose accounting for a major. The Bureau of Labor Statistics predicts that the need for accountants and auditors will grow by 11% in the next 10 years. Though much of the preparation is the same for all accounting careers, there are some specialties that require coursework centered on applicable concepts. Tax accounting, corporate accounting and auditing are considered specialties. Of these, auditing requires a knowledge of accounting principles and, at times, an investigative nature. Interestingly, many auditors choose to specialize further within the auditing profession.

1. Financial Auditing

Financial auditing is the most widely known of the audit specializations. Most businesses and grant-funded nonprofits have financial audits performed on their financial statements every one or two years. The focus of this type of audit is making sure that the statements represent a fair and accurate picture of the organization. A review of a sample of transactions may be conducted to confirm that business practices are followed and there are no irregularities. In most cases, the organizations treasurer and executive will be interviewed to confirm accounting practices. The resulting report is addressed to the owner or board of directors.

2. Internal Auditing

Internal auditors are usually found in larger organizations as employees or consultants. They are tasked with making sure the organization is in compliance with applicable accounting principles, but many times have additional duties. Internal auditors may be tasked with compliance issues such as insuring there are adequate internal controls and that there are no discrepancies. This could be done through testing of specific transactions, interviewing individuals and evaluating internal processes.

3. Forensic Auditing

Forensic auditors are vital in the investigation and prosecution of white collar crimes. A good forensic accounting reviews accounting statements and transactions, following the money to determine if a crime has occurred. If there is information that leads to a crime, the forensic auditors will work with the FBI, state or local law enforcement to gather evidence and build a case.

4. Operational Auditing

Operational auditors are interested in process and practice. They are tasked with confirming that the established policies and procedures are followed and that they lead to the best outcome. The auditor will test a series of business operations, review documentation of prior transactions and interview involved employees to determine the efficacy of the policy and whether it is being followed. In most cases, operational auditors will provide suggestions for process improvements leading to increased internal controls.

5. Compliance Auditing

The compliance audit is focused on the organization’s compliance with external laws and regulations. They are found most frequently with organizations that receive federal funds. They myriad of federal requirements require specific knowledge that is outside the scope of most audits. The auditor will conduct a review of policies and procedures to make sure all required statements are included. She will also conduct a sample testing of transactions, review documentation supporting charges to the grant and inventory check.

Related Resource: What Careers are in Forensic Accounting?

Auditing is important to the proper functioning of an organization and should not be feared. Organizations should periodically change auditors to overcome any drift to complacency. An effective auditor will be able to build rapport and work to understand the workings of the organization. This cooperation aids the organization and the auditor in completing the review and report.

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