External auditors are an important profession in the business world, especially in maintaining the transparency of the company's financial statements. In contrast to internal auditors, external auditors are tasked with providing an independent assessment of the company's financial statements and compliance with accounting standards and applicable regulations.
This article will discuss in full about the definition, duties, roles, responsibilities, to the salary of external auditors, along with examples of its application in the company.
Definition Of External Auditor
In simple terms, an external auditor is an independent party appointed by a company to audit its financial statements. External auditors usually come from public accounting firms (KAP) that have official licenses and are recognized by financial authorities.
Unlike internal auditors which is part of the company, the external auditor does not have a structural relationship with management. This makes their opinions more trusted by investors, shareholders, and regulators.
Difference between external and Internal Auditors
- Internal Auditors: work within the company, focusing on operational evaluation, compliance, and risk management.
- External Auditor: independent parties from outside the company, focusing on the examination of financial statements objectively.
Why Do Companies Need External Auditors?
- To increase the credibility of financial statements.
- As a condition of compliance with financial regulations.
- To convince investors and stakeholders that the company's financial statements can be trusted.
Duties Of External Auditors
The work of an external auditor includes several key responsibilities related to the financial statements and compliance of the company.
1. Able To Work Independently And As A Team
External auditors examine the annual financial statements to ensure that they comply with accounting standards (e.g. PSAK or IFRS).
2. Assess compliance with standards and regulations
In addition to examining the figures, external auditors also assess whether the company has complied with applicable financial regulations, including taxes and the provisions of the Capital Markets Authority.
3. Provide An Independent Audit Opinion
The results of the audit will be set forth in the report audit opinion. This opinion is very important because it is a reference for investors and regulators in assessing the truth of the company's financial statements.
4. Provide Repair Recommendations
Although not a primary task, external auditors often advise on improvements related to the company's financial system or internal controls.
The role of external auditors in the company
The role of the external auditor is not only limited to providing opinions, but also contributes to public confidence in the company.
1. Ensuring Transparency Of Financial Statements
External auditors ensure that the published financial statements reflect the actual conditions, so as not to mislead outsiders.
2. Become An Independent Party
Because it comes from outside the company, external auditors can provide an objective assessment without conflict of interest.
3. Increase Stakeholder Trust
Investors, creditors, and the general public will have more confidence in the financial statements that have been audited externally.
Responsibilities Of External Auditors
In addition to basic duties, external auditors also have ethical and professional responsibilities.
1. Maintain independence and objectivity
An external auditor should not have personal interests that could affect the results of the audit.
2. Maintain Data Confidentiality
All company data obtained during the audit is confidential and should not be misused.
3. Conduct Audits According To Professional Standards
External auditors must follow applicable auditing standards, such as the Public Accountant Professional Standard (SPAP).
4. Provide accurate reports
Each audit result must be clear, accurate, and not misleading to the users of the report.
External Auditor Salary
The profession of external auditor has quite promising prospects in terms of earnings.
Factors affecting salary
- Location of the company and public accounting firm.
- The auditor's work experience.
- Sertifikasi profesional (CPA, ACCA, dll.).
- The size and complexity of the audited clients.
Salary range of external auditors in Indonesia
- Level Junior: Rp5 million-Rp8 million per month.
- Level Senior: Rp9 million-Rp15 million per month.
- Manager & Partner: can reach Rp20 million-Rp50 million per month, even more in large accounting firms.
External Auditor Career Prospects
Many external auditors have careers in reputable public accounting firms, then continue their careers in the corporate sector as financial managers or even directors.
Examples Of External Auditors
Public accounting firm (KAP)
Examples of external auditors that are often used by companies are KAP registered with the Financial Services Authority (OJK). Some well-known international firms are Big Four: Deloitte, PwC, KPMG, dan EY.
Companies that use external auditors
Usually public companies, multinational companies, or entities with a large scale are required to use the services of external auditors for their annual financial statements.
Simple Case Study
For example, a large manufacturing company appoints an external auditor to ensure its financial statements match accounting standards and that there are no material errors. The results of the audit became the basis for foreign investors to invest more capital.
Challenges faced by external auditors
Although it looks prestigious, this profession has its own challenges.
A. Pressure to maintain independence
Many times external auditors face pressure from clients to make audit opinions more “soft”. This is where integrity is key.
B. Complexity Of Regulation
Accounting standards and financial regulations are constantly evolving. Auditors must constantly update their knowledge.
C. Industry Dynamics
Each industry has different characteristics, so auditors must understand the intricacies of their client's industry.
Closing
External auditors are independent parties that have an important role in maintaining the credibility of the company's financial statements. They are tasked with examining financial statements, assessing compliance with regulations, and providing an objective audit opinion. This profession has great responsibilities, including maintaining the independence, confidentiality and accuracy of audit results.
With competitive salaries and bright career prospects, external auditors are becoming one of the demanded professions in accounting and finance.
Recommendations to support the work of Auditors
To support the effectiveness and efficiency of the audit process, the use of technology can be the right solution.
Audithink App present to assist auditors in:
- Prepare audit reports more quickly and neatly.
- Manage audit documentation systematically.
- Support the implementation of corporate compliance standards.
Want to increase the productivity of audit work? Audithink provides free demo so that you can try directly the ease of conducting audits digitally, structured, and efficiently.
