Auditor Definition: Qualities and Types of Auditors

Auditor Definition, Qualities and Types of AuditorsAn auditor is not bound to be defective, or to approach his work with suspicion, or with the foregone conclusion that there is something wrong.

He is a watchdog but not a bloodhound. He is justified in believing servants of the company and is entitled to rely upon their representations, provided he takes reasonable care.

An auditor is not bound to assume when he comes to do his duty that he is dealing with fraudulent and dishonest people if circumstances of suspicion arise he has to probe them to the bottom.

Definition of an Auditor

An auditor is responsible for judging the validity and reliability of a company by evaluating evidence and financial reports with established standards.

The person doing the audit and who is ultimately responsible for the results of the audit is called an auditor.

An auditor multiple his hand by employing the assistance for doing the work, but still, he alone is responsible for what he does and others do for him.

So, an auditor is a professional that accumulates and evaluates evidence to report on the degree a company’s assertions that they comply with an established set of procedures or standards (criteria).

The following statements of famous Judges have been made from time to time, regarding the qualities of an auditor;

“An auditor is not bound to be detective, or to approach his work with suspicion, or with the foregone conclusion that there is something wrong. He is a watch-dog but not a blood-hound. He is justified in believing servants of the company, and is entitled to rely upon their representations, provided he takes reasonable care.” (Lopes, L.G. in re Kingston Cotton Mills case, 1896).

“An auditor is not bound to assume when he comes to do his duty that he is dealing with fraudulent and dishonest people…………………………………. if circumstances of suspicion arise…… it is his duty to probe them to the bottom,” – Lord Alverstone , C.J. The London Oil Storage Co., Ltd, vs. Seear Hasluck and Co. (1904).

“If the course of these long and arduous audits the auditor has in even one instance fallen short of the strict duty of an auditor, he cannot, I apprehend, be excused merely because in general, he displayed the highest degree of care and skill.” Romer J., in The City and Equitable Fire Insurance Co., Ltd. (1924)

“He is not an insurer; he does not guarantee that the books do correctly show the true position of the company’s affairs” Lord Justice Lindley.

Qualities of an Auditor

An efficient auditor must have certain qualities besides Professional qualification. He needs to carry out the audit efficiently and smoothly.

  1. An auditor needs to be well versed in the fundamental principles and theory of all branches of accounting, e.g., general accounting, cost accounts, income-tax, etc. A person can’t audit the accounts unless he knows how to prepare them. He should be aware of the latest development of the technique of accounting so that he may modify his procedure of work.
  2. He should not pass a transaction unless he knows that it is correct. This is possible only when one knows thoroughly well the principles of accounting.
  3. He should be able to grasp quickly the technical details of the business whose accounts he is auditing. If possible, he should pay a visit to the works of his client, before he commences his work.
  4. He should be prepared to seek elucidation on technical questions rather than show a false pride or fear of displaying his ignorance.
  5. He should be quite familiar with the company and mercantile laws and must be complete master of the principles of auditing.
  6. He must be tactful and scrupulously honest. He must not certify what he does not believe to be true, and he must take reasonable care and skill before he believes what he certifies is true.
  7. He must not be influenced, directly or indirectly, by others in the discharge of his duties.
  8. Sometimes he is put in a very awkward position when his duty to his client is opposed to his interests, in which case he must have the courage to carry out his duty faithfully and honestly, even if such a step harms him. In the long run, this policy will be of immense value to him. He will acquire a reputation for his honesty, which will bring more business to him.
  9. He must be prepared to resign, rather than sign a balance sheet, which he knows does not exhibit a true and fair view of the state of affairs of the concern and thus give a false report.
  10. He should not disclose the secrets of his clients.
  11. He must have the tact to put intelligent questions to extract full information.
  12. He must not adopt an attitude of suspicion.
  13. He must be prepared to hear arguments and must be reasonable.
  14. He must be vigilant, cautious, methodical and accurate.
  15. He should have the ability to write the report, correctly, concisely and forcefully.
  16. He should have an understanding of the general principles of economics.
  17. He should have thorough training in a business organization, management, and finance.
  18. Last but not least, he should have “Common Sense”.

Types of Auditors

Auditors carefully examine financial records so they can evaluate an entity’s financial position and the authenticity of its data.

This requires experience not only in all types of accounting practices but also in various tax, laws and financial regulations governing the use of certain documents.

While it takes a highly trained accountant to work as an auditor, there are different types of auditors with different audit aims.

Several types of auditors conduct these procedures.

Types of Auditors are;

  1. Independent/External Auditors: Profesional Audit services providors.
  2. Internal Auditors: Company’s own in-house expert auditors to maintain internal control and audit the company’s internal activities.
  3. Government Auditors: Auditors that are working with various government agencies; where why audit internal agency audit and/or audit the corporations by court order or government law.
  4. Forensic Auditors: They are hired to play Sherlock. Auditors that specialize in crimes and are used by law enforcement organizations.

Types of Auditors

Independent/External Auditors

Independent auditors are usually Chartered Accountants (CAs) who are either individual practitioners or members of public accounting firms who render professional auditing services to clients.

In general, licensing involves passing the uniform CA examination and obtaining practical experience in auditing.

Internal Auditors

Internal auditors are employees of the organization they audit. This type of auditors is involved in an independent evaluation of evidence, called internal auditing, within an organization as a service to the organization.

The objective of internal auditing is to assist the management of the organization in the effective discharge of its responsibilities.

Government Auditors

Government auditors are employed by various local, state, and federal governmental agencies.

At the federal level, the three primary agencies are the General Accounting Offices (GAO), the Internal Revenue Services (IRS), and the Defense Contract Audit Agency.

Forensic Auditors

Forensic auditors specialize in crimes and are used by law enforcement organizations when financial documents are involved in a crime.

This does not necessarily mean the crime was financial (although this can be the case) but rather that the law enforcement organization needs to track money used to find out where it began or ended up.


The roles of auditors are intertwined with the evolution of the auditing theory itself, as auditing evolved based on circumstances the evolution directly influence the functions and the entire practice of auditors.

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