The Role of Auditors in Financial Accountability

Every business must maintain an accounting statement for financial integrity. For creating financial reports, the auditors serve as a vital business element. They assist an organisation in maintaining consistency, finding mistakes, or identifying fraud in accounting records.

Auditors examine all the business’s accounts to ensure that their accounting records are correct and in line with the law. In this blog, you will discover the role of auditors in financial accountability.

The Role of Auditors in Financial Accountability

What are the skills of an auditor?

Auditors are financial experts with a solid basis in accounting and regulatory compliance. Their analytical abilities, attention to detail, and efficient communication enable them to recognise discrepancies and convey findings. 

Additionally, they also have flexibility, problem-solving abilities. In essence, the auditors are adaptable experts who protect financial integrity, navigate regulations, and ensure adherence within organisations.

Role of Auditors in Financial Accountability

Reviewing statements

Auditors can assist companies in preparing and finalising financial statements. They can also fact-check these accounting records for precision or identify errors and anomalies. Auditors can provide companies recommendations on how to enhance their accounting records or advise the company on how they can improve. 

For instance, an auditor can examine an organisation’s financial report and realise it doesn’t include comparative financial information. They can recommend that the company issue two distinct income statements, one comparing their actual amounts to anticipated revenues and the other contrasting their actual amounts to the prior year’s amounts.

Monitoring performance

An auditor can assist a company in identifying potential problems before they arise, for instance, the auditor can identify patterns or signs that an organisation is or isn’t a going concern, which could compromise its capacity to meet its ongoing and future financial responsibilities. 

Detecting fraud

Auditors can assist firms in identifying the source of fraudulent behaviour or those responsible. They can often use developed auditing methods and software to inquire about the company and its areas of concern. 

The auditor can use e-auditing software or forensic knowledge to identify duplicated amounts of purchase order figures. They can identify the origins of false emails to find out who issued the order and recommend the business on how to proceed.

Internal Control Evaluation

Auditors assess a company’s internal controls, which are procedures and systems designed to protect assets, prevent and identify fraud, and ensure the reliability of financial reporting. They evaluate the efficiency of internal controls by testing their design and implementation, determining shortcomings, and offering recommendations for improvement. 

Auditors examine the segregation of duties, approval and authorisation processes, access controls, and documentation procedures to ensure adequate controls are in place.

Interviewing accounting professionals

If an auditor calls for clarification on a component of a company’s accounting or its approach to it, they can interview the finance department for further insight. This interview can also identify areas the company can improve. For instance, an auditor can ask employees if they’ve encountered any major accounting or auditing problems in previous years or during previous audits. 

Compliance with Regulations and Standards

Ensuring adherence to financial regulations and accounting principles is an essential component of the auditor’s role in upholding financial transparency within the United Kingdom. Auditors in the UK work within a framework encompassing domestic regulations, international accounting norms, and industry-specific standards. 

Auditors thoroughly evaluate an organisation’s adherence to the UK Generally Accepted Accounting Practice (UK GAAP) or International Financial Reporting Standards (IFRS), depending on the company’s current status and preference. 

These standards serve as the foundation of financial reporting in the UK and offer instructions for creating accurate and reliable financial statements. Auditors carefully compare the financial statements against these standards to ensure they adhere to the prescribed rules, promoting transparency and uniformity in financial reporting.

Final thoughts

This blog tells us about the basic  roles and responsibilities of an auditor. An auditor is vital to the business and the company’s finances. However, they must also offer a wide range of strategies to save costs, boost sales, and improve profits for the business.

In the accounting field, an auditor is an individual who is entirely accountable for assessing the reliability and validity of the accounting documents and statements.