What is an accountant?
Accountants are responsible for compiling financial data into accurate documents. They can provide advisory services to the management team of a company as well as to individual clients. There are three main types of accountants; public, managerial and federal.
Public accountants work with private individuals or corporations. They perform similar services to the other branches, like preparing documents and consulting for investors. Managerial accountants focus on an internal structure within a company, or they may manage more than one department’s finances. They might also manage holdings, including real estate and stocks.
Government accountants work to manage budgets at local, state and federal levels. They perform audits as needed and help make sure funds, when allotted, are directed to the appropriate place. Auditors can also investigate “white-collar” crimes such as embezzlement. As with any other type of accountant, they may be hired to perform document reviews and investigate accounting issues.
An accountant’s job duties include:
- Performing bookkeeping services
- Reviewing financial documents for validity
- Managing expenditures and income-generating accounts
- Ensuring financial statements follow state and federal guidelines, including balance sheets and cash flow statements
- Preparing tax returns
What is an auditor?
An auditor focuses on verifying the validity of information rather than preparing it, which is the key difference between accountants and auditors. An auditor may be called in periodically as an independent contractor to review a company’s documents for errors, or they can work in the financial department of a corporation.
The auditor job description includes:
- Preparing tax returns
- Analyzing financial documents with a focus on accuracy
- Investigating the validity and effectiveness of financial software on behalf of their clients
- Creating balance sheets and ledgers
- Communicating closely with the CFO and other financial executives to ensure operations are run efficiently, such as by analyzing company spending
When is an audit needed?
There are various times when an audit will be needed, depending on the size and operations of the company. Audits aren’t typically mandated by federal law unless the company in question is a charity using over $750,000 of federal funds in a year.
Companies usually choose to perform audits because there is an issue in the accounting department, or they need to provide updated financial documents to banks or investors.
The Internal Revenue Service (IRS) performs over 500,000 tax return audits yearly, usually on a random basis. There are situations when an audit would be specifically requested, such as when during the course of business you have a financial transaction with a company that was selected for an audit. In this case, the IRS would request an audit of both businesses’ accounts to verify their records align.
There are four types of audits:
- Financial audit – This audit investigates to ensure that reported figures match actual figures in financial statements and that generally accepted accounting principles are in practice
- Compliance audit – Company policies are examined to verify they are following local, state and federal laws and guidelines for accounting practices, and this audit often occurs with a financial audit
- Economy and efficiency audit – This audit ensures a company is maintaining the highest possible standards in operations, such as the most efficient use of space, and that it’s in compliance with local regulations
- Program results audit – This audit looks at the results of a program or project and determines if it was undertaken effectively and can be completed with fewer resources in the future
Key differences between accountant and auditor
Auditors and accountants lead similar professional lives for the most part. The Bureau of Labor and Statistics (BLS) actually counts professionals under both fields in the same category. While many of the job duties are similar, both follow the same schedule, and may even work together on a project, there are some finer points to consider about the positions.
Both roles need to be filled by a person with a passion for accurate data and a keen eye for detail, but an auditor must also be an investigator. This job often entails investigating a financial crime, which companies might actively work to cover up. As a result, the auditor must step in and determine where the problem lies and who is responsible for creating it.
Accountant vs. auditor FAQs
Is an accountant the same as a CPA?
A Certified Public Accountant has met state licensing requirements and can perform additional services, such as attestation services and representing individuals before the IRS. A CPA tends to charge more for their services than an accountant.
Do companies need to keep an auditor on their staff?
No, in fact, many times, audits must be performed by an outside group, such as in the case of IRS audits. Companies may have an auditor or accountant on their internal review board, especially if they have a large number of employees or a high sales volume.
What are the educational requirements to be an auditor or accountant?
There are no set education requirements for either position federally, but most will need a Bachelor’s degree or higher to find work. To gain a higher standing in the field, both will need to earn a CPA license, which requires 150 hours of college to obtain nearly a Master’s degree.
