The advantages of engaging an Auditor

An auditor is a type of “public officer” who certifies that the Annual Accounts are “good”. What does this mean? When an auditor issues a “favourable” report this indicates that “in his professional opinion” the accounts “present a reasonably faithful image…” The auditor does not therefore “ certify ” anything. He gives a professional opinion or, in other words, his professional opinion on these audited annual accounts. He also says that “ reasonably” (not with mathematical accuracy but with a certain level of approximation) the annual accounts are a faithful reflection of the true, economic-wealth of the company audited and the results it has achieved.

The auditor is therefore neither an accountant, nor an inspector who analyses one hundred per cent of the accounting documents for the purposes of issuing a final verdict or opinion. This is not the case. The procedures used by the auditor are based on sampling. The samples analysed are not, generally, excessively extensive. This is only so when internal controls are performed and accounting requires if. So it is not a matter of finding the annual accounts completely exempt and free of errors and discrepancies, but rather of these not surpassing certain limits of “tolerance”. The report can therefore have "provisos", which means there are certain limitations found or partial questions unresolved, which do not mean the rest of the Accounts are incorrect.

Neither is the auditor a detective looking for fraud, theft and irregular transactions. If something is uncovered along the way, he will try to reach the end and make it perfectly clear. However, his working methods are not designed for this specific purpose. What happens is that these methods mean most of these irregular situations are detected in the auditor's work.

The key is to have a positive attitude towards the auditor's work, which helps to clarify the accounting documents and as an accolade which represents greater reliability and gives additional guarantees to third parties. The auditor also advises the company about the correct accounting treatment of many situations that may arise.

As a result of this, the auditor is more of a help to the company, unlike the cold accounting official who prepares the figures and the accounts. Contracts tend to last several years, allowing better knowledge of the problems of the company audited and its circumstances.

In addition to the above, the professional auditor, in his role as an auditor, may carry out a series of actions supplementary to those indicated above. He can carry out all types of accounting reviews of specific areas of the accounts or of the company's financial activities. He can act as an “independent expert”. This role was created in the most recent reform of Spain's company law at the beginning of the 1990s. The Commercial Registry, the Courts and the companies themselves can designate auditors to do different jobs which must be done regularly. Finally, the auditor is a suitable professional for auditing management or for helping to introduce a good level of internal control.

Set out below are some questions that may help you to get a better understanding of the work done by the auditor:

1.      The Accounts Auditor is highly prepared and trained . To become an auditor it is necessary to attend courses and take specific examinations. Auditors also need to have certain practical experience. Most of them have degrees and diplomas in Economics and Business Studies or commercial qualifications.

2.      Auditors do not work with a prosecutor's mentality , magnifying glass in hand, to see who they can “catch” and who is “guilty”. Quite the contrary. As a professional expert, Auditors follow the company's accounting records using a certain technique and evaluate any errors or irregularities they might find, to see the impact these might have on the Annual Accounts.

3.      The Auditor informs the company of any discrepancies and errors he finds. Management will be informed of any deficiencies or weaknesses in their internal control, which might be called "shortcomings or omissions” in the system used by the company. Any mistakes or discrepancies in the accounts, if they are of a certain importance (significant or material in professional slang), will lead him to suggest adjustments and reclassifications of the accounts. If the company accepts and takes responsibility for them, the "shortcomings” and the “discrepancies” will have been resolved and a set of correct Annual Accounts will be presented.

4. Do not confuse an Auditor with a Tax Inspector. Please, there are some serious differences! The Auditor is going to supply you with a professional service. He is not going to inspect. This is provided in the context of a professional who is independent of the company.

5.      You should and must trust the auditor. He is subject to strict professional secrecy . This means he is forbidden to use his knowledge of a company for other, external purposes. His relationship is directly and solely with his client, the company audited. It is the client who makes whatever use he wishes of the audit, and who is the only party able to authorise a third party to access the working documents from his audit.

6.      Do not believe the auditor knows nothing about your company or your sector. All auditors hear their clients say “ my company is completely different" or " this sector is different from all the others". The managers of the company to undergo the audit do know everything about their companies and sectors, generally more than the auditor. But this is with regard to procedural aspects, or the company's activities. With regard to management and, specifically, the economic and administrative area the Auditor has extensive knowledge, derived from his training and professional experience.

7.      The audit and other work related to it to be done by the Auditor must not be faced solely on the basis that these are a legal requirement. Because it is an obligation or required by commercial law. It can be voluntary. Many companies have audits to guarantee their Annual Accounts and the accounting documents are correct. This inspires confidence in management and enables malfunctions, shortcomings or discrepancies to be corrected. It also is also useful for training the personnel involved in preparing them.

8.      Do not always automatically assume that your employees or collaborators in the company's management are right, when faced with the auditor's opinions or reports. Avoid this systematic confrontation. Remember that your people can make mistakes or want to maintain their criteria at any price. Or they might just be afraid about what the Auditor might say.

9.      The Auditor should not inspire “fear” or “terror” among the employees. He should be respected, and also trusted. This is the general case.

10.  Do not choose your Auditor on the basis of price only . The one who gives you the lowest estimate! You must analyse other aspects such as the scope of the proposal, the auditor's or the firm's prestige, experience, any references you may have regarding him or his work, and the timeframe proposed. Making a choice based merely on price, as with in other areas of life, can be a mistake. The Auditor needs time to do his job thoroughly and well. And time, hours, have a price according to the Auditor's professional category. This means that “miracles at low prices” are not usually possible.