What's an "auditor"? A guide for students

If you've ever looked into roles at a big accounting firm, you've probably seen the word "audit" pop up a lot. What does it mean and why do "auditors" exist? Let's dive in!

1. What are auditors? (Why do they exist?)
2. What do auditors do day-to-day?
3. What's assurance?
4. What kind of audit roles are there?
5. What kind of companies do auditors work for?

What are auditors? (Why do they exist?)

Picture this: You've been carefully saving up, and you're now ready to invest in the stock market. It's exciting, but there's a catch – investing your money means taking a risk, and the stakes are high. You want to be sure that the companies you're investing in are as financially healthy and stable as they claim to be. But how can you be certain?

This is where auditors come into play. Auditors scrutinize companies' financial statements to make sure that everything adds up.

Think about it like this: If you run a company and you know that at the end of the day, someone's going to poke their nose into your books and ask about anything fishy, you'll probably be more careful about keeping your records straight and following the rules.

The last thing accountants want is for an auditor to come in behind them only to discover discrepancies or errors. – Thomson Reuters

Of course, auditors do sometimes fail us, bringing about tragic consequences. But if we didn't have them at all:

• There would be a lot more sketchy business going on – companies exaggerating their earnings, hiding their debts, understating their expenses, overvaluing their assets, and more.
• Investors wouldn't be as eager to invest, and businesses would get fewer investments as a result. The whole financial system would slow down or even crumble.

So auditors are kind of like referees in a sports game. They won't be able to catch all instances of cheating, but they certainly help reduce cheating and ensure that things are as fair as possible.

What's "assurance"?

You may have noticed that the term "assurance" often comes up with "audit." Assurance is all about giving confidence (or "reasonable assurance") that what a company says about its finances and operations is reliable.

How does assurance differ from audit?

• Audit is a type of assurance work that focuses on financial data: In an audit, you check the financial data that a company reports.
• Assurance services go beyond financial audits: If you're providing assurance services in general, you wouldn't just check a company's finances. You'd do any type of work that makes everyone, especially investors, feel more confident about the company's health and honesty. This might involve checking how a company does certain things or making sure its internal rules are being followed correctly.
• Assurance work is more open-ended: If you do get to work on assurance engagements, it'll be more open-ended. While audits are often governed by specific standards, assurance engagements might follow different procedures set by a government, a bank, or another entity.

For the most part though, if you work in a company's "Audit & Assurance" department, you're mostly doing audits!

What do auditors do day-to-day?

While it's an important job, auditing probably isn't the most glamorous type of work out there. To get the low-down on what auditors do, check out:

• Big 4 junior auditors share what their work is really like
• From intern to partner: Accounting career & salary progression explained

What kinds of audit roles are there?

Here are the main kinds of audit roles that hire interns and college grads.

#1 External audit roles

An external audit is done by people who don't work for the company they're checking. They're like independent experts who come in to make sure the company's financial statements (the records showing how much money it made and spent) are correct and honest.

This is important for investors (people who have invested money in the company), regulators (officials who make sure companies play by the rules) and for others who need to trust that the company is doing things the right way.

#2 Internal audit roles

In an internal audit, the company looks at its own activities. It’s like checking your own work to find mistakes or areas to improve.

Companies often hire experts from big accounting firms for this. These auditors look at more than just money matters; they also check if the company is working efficiently and following its own rules and laws. It's a way for the company to make sure it's doing its best in all areas.

Depending on your role, you may get to do both internal and external audit work.

I do some internal audit work but mostly external audits over financial statements. Key focus is adding value to clients. – Junior auditor @ PwC

You'll often hear the word "controls" used in internal audits. Controls are the rules or tools that a company uses to make sure it doesn't get in trouble. For instance, imagine a rule where two teachers have to check your homework to make sure there are no mistakes. This would be a control to prevent errors. As an auditor, you'd help check to make sure that these controls are working or suggest better ones.

We provide internal audit services for other companies. We look at companies' processes and identify the risks and controls they have in place. – Audit junior @ PwC

#3 Financial services audit roles

In a financial services audit role, you'd audit companies in the financial services industry. Think: banks, insurance companies, investment funds, and brokerage firms.

Given the critical role these institutions play in the economy and the complexity of their operations, auditing in this sector is particularly specialized and important. And you also have a chance of being hired by these institutions when you want to leave public accounting!

#4 Private audit roles

Many audit firms also perform audits for private companies – those that aren't listed on a stock market. Here are some pro's of working a private audit role:

• Private companies don't have as many rules or deadlines they need to follow, since they aren't subject to the slew of reporting and compliance requirements that public companies are. For auditors, this means your work will be simpler (e.g. you may not need to test for controls) and you'll also enjoy better work-life balance!
• You'll get exposure to a wider range of businesses and work. Public companies tend to all be huge multinational corporations, which means your role as a junior auditor will likely be minor and limited. However, with private companies, you might work with a start-up one month and a well-established family business the next. This variety means you could be dealing with different scales of operations and diverse business models, making the work in private company auditing varied and dynamic.
• You'll get more responsibilities earlier on. Instead of being relegated to a small part of the audit work, you're more likely to get to see an audit from start to finish in private enterprise audit roles. You'll also get to manage client relationships earlier in your career, whereas with big public companies, you wouldn't communicate with CFOs until you're a partner or manager.

If you're in your 2nd or 3rd year ... you'll be liaising directly with the FD or CFO whatever they call themselves, but basically you'll be in the deep end, managing the relationship with the most senior members of the client's finance function ... and this just is not how things work with [public] clients, where the unwritten rule is that partners are responsible for dealing with CFO-level people and you as a more junior member of the audit team stay in your lane ... which can be slightly uninspiring. – Audit junior at a Big 4 firm

On the down side, because you'll be handling all sorts of companies, there's no guarantee about the type of company you'll get (some of them may be a hot mess!). Private enterprises tend to be more local, so you'll also get less international exposure if that's what you're looking for. 

#5 Forensic auditing roles

The rise of financial crimes (and their increasing complexity) around the world has turned forensic accounting into growing profession. As a forensic auditor, you would analyze financial activities, primarily to detect and prevent fraud.

You would work for government agencies (e.g. the FBI, the Department of Justice), private investigation firms, consulting firms, law firms, accounting firms (including the Big 4), risk management firms, and more.

#6 IT auditing roles

In today's business world, most financial activities – like recording transactions, managing accounts, and generating financial reports – are carried out using IT systems and software. This means that the accuracy and reliability of financial information depend heavily on the technology used.

IT auditors make sure that this technology works as it's supposed to! For example, you might help a company's IT controls that directly affect financial processes, like how accounts receivable is aged or how assets are depreciated.

While the job is in IT, you don’t need advanced technical skills as your training usually covers all the essentials.

#7 Niche audit roles

Finally, if you have any specific interests, you may be able to find a niche audit role that fits it.

A growing practice area is ESG audit. Investors and stakeholders are increasingly seeking transparency in ESG initiatives—and with experience in auditing financial statements, regulatory information, and managing internal controls attestation, this niche translates well for auditors who can seamlessly apply their knowledge to ESG data sets.  

The same holds true for cryptocurrency audits which are a growing need.  – Thomson Reuters

What kind of companies do auditors work for?

Auditors work for all kinds of employers across different sectors. Here's just a snapshot of where you might could work as an auditor.

Public accounting firms

Public accounting firms are hired by corporations, governments, and other entities to perform audits. These firms are often called "audit firms" because their primary service is to conduct independent audits of other businesses.

• Big Four: Many auditors work at large, international accounting firms like Deloitte, PwC, KPMG, and EY. These four firms are responsible for auditing the majority of big, publicly-listed companies in the world.
• Mid-size and small firms: Besides the Big Four, there are numerous mid-size and smaller accounting firms that offer audit services. These can offer more specialized or regional expertise.

Corporations and businesses

At a corporation or a business, you'd help audit the company you work for.

• Large corporations often employ their own team of internal auditors to review financial and operational activities, ensuring internal controls (rules for preventing & catching missteps) are effective and risks are managed. 
• As an internal auditor, you could work in all sorts of industries. As an auditor in the retail sector for instance, you might conduct audits of inventory records to ensure that physical stock levels match the recorded amounts, preventing losses from theft, damage, or mismanagement. In healthcare on the other hand, you might check that a hospital's billing aligns with insurance policies and government healthcare programs (like Medicare), making sure the hospital follows all the rules about what can be charged and how much can be charged.

Government agencies

• Public sector auditors: Auditors can work for government agencies at the federal, state, or local level. They audit government departments and public agencies, ensuring taxpayer funds are used effectively and efficiently.

Financial institutions

• Banks, insurance companies, and other financial institutions employ auditors to ensure compliance with financial regulations and internal policies.

Nonprofit Organizations

• Nonprofits and NGOs often hire auditors to ensure they are using their funds appropriately and to maintain transparency with donors and stakeholders.

What next?

We hope this gives you a better idea of what it's like to be an auditor. And if you're still on the hunt for a promising opportunity, check out all the internships we have in this field!