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Discussing Public Accounting Practices – Accounting & Auditing

Written by AnonymousAugust 2, 2011
Accounting and Auditing

Many certified public accounting firms choose to specialize in providing auditing services to clients. Audit services typically generate a lot of income for very large firms, mid-sized firms, and small organizations. Auditors, as you may already know, are a type of accountant that examines clients’ financial statements to determine whether the statements are accurate. Ensuring that a company’s financial statements are true and accurate is a critical, central role of the auditor.

Many types of people need reassurance that a company’s financial statements are indeed precise including investors, creditors, people who may lend money to a company, suppliers, potential business partners, and even employees. In the past, many documents had to be examined manually during an audit, but computer systems and advanced technology now allow auditors to use state-of-the-art, computer-based, automated techniques to perform many audit functions. However, the auditor must still offer validation, through his professional opinion, that a company’s financial statements are indeed accurate and truthful.

In particular, an auditor is responsible to perform tasks, such as

  • Confirm the accuracy of a company’s stated bank balances
  • Verify the amount of inventory a company has on hand at the end of its fiscal year
  • Document and confirm the ownership of a company’s fixed assets (such as buildings and equipment)
  • Determine depreciation schedules on those assets

Depreciation schedules reflect the reduced value of assets over time. These tasks help establish the actual value of a company’s assets. In other words, an auditor’s job is to confirm that a company has accurately stated the value of all of its assets and liabilities on their financial statements to any interested party.

Auditors must have a solid understanding of current business practices and must always keep this in mind as they examine a company’s operations. They may be required to consult with management, directors, and outside counsel to clarify the company’s long-term goals and review the strategies it has applied to date to achieve those goals. Beyond analyzing and confirming the accuracy of a company’s financial statements, auditors typically review a variety of internal business documents, such as business contracts, invoices issued, invoices outstanding, bank statements, and inventory logs.

The auditor’s job is to confirm the accuracy of the financial standing of a company at a given point in time.

Auditors are also required to review and analyze the methods and procedures that make up a company’s internal control system, as well as the way employees interact within this system. Internal control is simply the way a company does business with its customers and suppliers. That is, how a particular company authorizes and engages in business transactions, how they safeguard their assets and resources, and how they ensure the accuracy of their internal accounting data. When a company has a solid internal control system in place, business is conducted more efficiently and the company tends to minimize waste, errors, and fraud. Auditors are trained in understanding the standard and commonly used internal control systems frequently found in different businesses across different industries. They’re usually very good at quickly indentifying these internal control systems and noting discrepancies or lapses in document control, which may compromise or weaken the system and lead to errors or waste.

After the auditor has analyzed all this information, she produces an audit report, which summarizes the conclusions reached during the auditing process. The act of reporting the auditor’s opinion on the accuracy of a company’s financial statements is called the attest function. When a company receives an audit report on its financial statements, it’s an accepted, professional confirmation that its financial statements are indeed true and accurate.

Professional Public Accounting Organizations

Most auditors, approximately 99 percent, are also CPAs and therefore must adhere to these same professional accounting standards that a CPA must. The leading regulatory organization in the field of accounting is the American Institute of Certified Public Accountants (AICPA). For the past 50 years, the AICPA has been responsible for the formulation and recommendation of professional accounting principles that govern CPAs and auditors. Most recently, the AICPA’s Financial Accounting Standards Board (FASB) has become the most influential mechanism for developing accounting standards in the private sector.

Salary Information

As with most jobs, the more senior the position, the more lucrative it is.

In the first year of working as an auditor at a midsize accounting firm, you can expect to make between $44,000 and $54,750. Between your first and third years, that range typically increases from $54,750 to $64,250. A senior auditor at a midsize firm can make between $62,000 and $81,750. An audit manager can expect to make between $79,500 to $102,500, while a senior audit manager or director can expect to make anywhere from $96,000 to $141,500.

At the management level, bonuses and incentives reflect an increasingly significant portion of overall pay and aren’t included in most standard salary ranges.