Job - Associate Auditor

Originally created by CtG
6 years ago.

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    This post was brought about by my interest to learn about others' jobs. I wanted to ask others to write a post on their job aspect page about what their work entails. However, I would be a big hypocrite if I myself wrote nothing about my job. So! I'm doing this to get the ball rolling, and so I can more effectively pressure people into talking about their jobs! Anyway, here goes...

    I'm currently an auditor. I work for a Company that gets income from primarily industrial clients. That means that our Company offers its services more often to businesses than to humans. For that reason, it's quite understandable that you probably have no idea what auditors are. I'm writing this comment now to explain in detail what my job is, so anyone who's interested can learn all about it. For those who dislike reading long comments, please scroll to the bottom of the comment to read a shortened version.

    ∞ What is auditing? ∞
    Auditing firms systematically engage in objectively obtaining evidence about their clients' economic activities in order to issue an opinion as to whether assertions made by their clients about their financial position and operations are in compliance with a set of pre-established criteria.

    Auditors have to get their evidence in an objective manner, to make sure that these evidence are reliable.

    ∞ The Auditing Standards and Practices Council (ASPC) ∞ said:
    Audit evidence will comprise source documents and accounting records underlying the financial statements and corroborating information from other sources.

    This means that we can't just draw evidence from hearsay or take our clients' words for it. Auditors practice "professional skepticism" which means we take things with a questioning mind. For example, when clients say that they made sales of $1,000,000, we don't immediately believe it's true or false, but we first obtain evidence such as duly approved invoices, warehouse delivery notes, and official receipts that evidence the sales, BEFORE we believe their assertions.

    It is IMPORTANT that we get reliable evidence before issuing our opinion because our clients have a lot of stakeholders who rely on their assertions for decision-making. The government wants to be sure to collect the proper amount of tax. The employees need to be sure that their job status is relatively assured for the short or long term. Lenders need to be sure before extending a loan that the Company will be able to pay it back. Customers and suppliers need to know if they will have a continuing business relation with the Company. The owners, of course, need to know whether their business is earning money. All those needs are addressed by the Company's assertions, which is why we need to be able to give them assurance that the assertions are fairly stated.

    The usual assertions are as follows:
    Existence/Occurrence - Does the Company really have this amount of cash? Did they really make this much sales?
    Completeness - Did the Company declare all of their liabilities and expenses?
    Rights and Obligations - Does the Company really own this piece of land?
    Valuation/Measurement - Is this car really worth this much? Are the salaries really this much?
    Presentation and Disclosure - Did they properly disclose information relating to their ongoing litigation?

    Usually, assertions are embodied in a set of financial statements which comprise a statement of financial position, a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, and supplementary notes.
    A statement of financial position details the assets, liabilities, and net worth of the Company. Assets are properties owned by the businesses [Contrary to popular belief, people are NOT assets unless we're talking about slaves because they're not owned by businesses!]. Liabilities are amounts the Company owes its lenders. Equity is how much the owners of the business would receive if right at that date, all the liabilities are paid and what's left is distributed to them.
    A statement of comprehensive income shows how much the Company earned in sales or service income, how much costs they incurred, and the net income which shows whether the business earned money, or lost money.
    A statement of changes in equity shows the amount of equity on the first day of the year, the changes during the year, and the amount at the end of the year.
    The statement of cash flows details the movement of cash into "operating activities", "investing activities", and "financing activities". Operating activities have to do with the daily operations of the Company such as sales, purchasing, and payroll. Investing activities have to do with the purchase and sale of long-term assets such as land and buildings. Financing activities have to do with the movement of long-term loans by the company and the investments of the owners.

    In my current context, those "pre-established criteria" are the Philippine Financial Reporting Standards [PFRS]. These standards are based on International Financial Reporting Standards [IFRS] followed in many countries around the world. [In the US, businesses follow a separately-assembled set of standards from the IFRS.] These standards aren't laws, but they are followed so that decision-makers would have an easier time comparing businesses' financial statements. It's easier to compare two things made in the same standard, after all! I'd go into the differences between the IFRS and the US standard, but it's probably too technical and stuff, so moving on...

    When the financial statements comply with the PFRS in all material respects, we issue an ∞ UNQUALIFIED OPINION ∞. This is the best kind of opinion possible from an auditor. Doesn't it give you pleasant and warm feeling when you're given an unqualified opinion? :D
    When there is a material misstatement or lack of evidence on assertions, but these do not affect the financial statements as a whole, the auditors issue a ∞ QUALIFIED OPINION ∞.
    When the misstatement is material and pervasive, the auditors issue an ∞ ADVERSE OPINION ∞. This is the worst type of opinion from an auditor.
    When there is a material and pervasive lack of evidence on the financial statements, the auditors normally just withdraw from the engagement. They'd not finish the work since they can't be sure if the assertions are true or not. If they cannot withdraw, they will instead issue a ∞ DISCLAIMER OF OPINION ∞.
    So... Wouldn't it be interesting to start a poll as to what audit opinion people would give on religions?...

    ∞ How do auditing firms work? ∞
    You may be under the impression that the nature of my work is corporate style where I have to interact with sales and administration and other departments. However, the setup in an auditing firm is a little different from most companies. There is a more defined path of promotion, and the best part is that you don't have to wait for your boss to die or leave before you get to be a boss, too!

    Auditing firms are normally PARTNERSHIPS in the Philippines because there is a law prohibiting accounting firms from being corporations. The law makes sense, I think, as there is more of a feel of accountability in a partnership. The partners are the owners, after all, so the regulatory authorities can chase after the partners if something goes very wrong. They wouldn't normally be able to do that in a corporate setting.

    The role of partners in an auditing firm is to do the final review of the outputs prepared by the audit team. Partners are the ones who sign the auditors' reports on the financial statements, so they are the first and foremost persons accountable for the opinion. The partners have the most expensive per-hour charging on the entire audit team because they normally have at least 10 years of auditing experience under their belts, and hundreds, if not thousands, of previous audit engagements. They normally only meet the clients before the actual audit, and when the team has prepared the work, and all that's left is the final opinion on the financial statements, which the partner is responsible for issuing. If something goes wrong, people can chase the partners. They normally have so many accounts per busy season that they can't be very hands-on for each engagement.

    Directors serve as the managers of the partners. There are normally two or more directors reporting to each partner. They handle the per-client operations of the audit team, which includes assigning the staff, arranging with the clients for the fieldwork dates, and reviewing the work of the staff. They don't sign the audit reports unlike the partners, but they are the ones next in line for admission to the partnership!

    Senior Associates are the most experienced of the associate auditors. In fact, they're normally just referred to as "seniors". They are responsible for the most complicated procedures of the audit such as determining what is "material" for the engagement, and help draft the deliverables to the client. They are responsible for determining the strategy for the audit, and designing the procedures to be performed on the records. They also preliminarily supervise and review the work of the less-experienced staff.

    Associates [That's me! :D ] are the base of the promotion ladder in an auditing firm. They are also responsible for most of the work done in an engagement. They are responsible for venturing to the clients' premises [sometimes accompanied by seniors], meeting up and getting to know the contact persons for the client, performing all of the "real audit" work such as interviewing the management staff to get an idea of how the clients' businesses work. They're the ones who ask for documents from the client, and the ones who get yelled at the most. They also do the most overtime, and get the least pay!

      Spoiler for I just want the main idea; I don't want to read an exhaustive essay.:

    ... Stupid 10,000 character limit. ;-;