External auditor facts for kids
An external auditor is like a financial detective for a company or organization. They check the money records, called financial statements, to make sure everything is correct and fair. They follow special rules and laws to do this.
External auditors are independent, meaning they don't work for the company they are checking. This helps them give an honest and unbiased report. People like investors (who put money into companies) and government agencies trust these reports.
In the United States, experts called certified public accountants (CPAs) are the main external auditors. In countries like the UK and Canada, Chartered Accountants often do this important job.
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What External Auditors Do
External auditors provide different services to companies. Their main job is to give an opinion on whether a company's financial statements are correct and don't have any big mistakes.
Checking Financial Records
Auditors perform various checks on a company's money records.
- Full Audits: They might do a complete check of all financial statements.
- Reviews: Sometimes, they do a less detailed check, asking questions and looking at numbers.
- Compilations: They might just help prepare financial statements and check them for obvious errors.
Staying Independent
It's very important for external auditors to be independent. This means they should not have any special relationship with the company they are auditing, other than doing the audit itself. This rule helps prevent conflicts of interest, so the auditor can always be fair and honest. For example, an auditor cannot own shares in a public company they audit.
External vs. Internal Auditors
You might hear about two types of auditors: external and internal. They both check financial information, but they have different roles.
Internal Auditors
Internal auditors usually work for the company they audit. They are employees of that organization. Their main job is to help the company improve its own systems, manage risks, and prevent fraud. They report to the company's management.
External Auditors
External auditors, on the other hand, are outside experts. They are not employees of the company they audit. They give an independent opinion on the company's financial statements to people outside the company, like investors and the public. This helps build trust in the company's financial information.
See also
- Audit
- Auditor's report
- Financial audit
