An auditor is an accountant who focuses on ensuring the accuracy of the financial records of companies and individuals. There are several types of auditors, including the internal kind who are employed by the company that they audit, while the external type works on a contract basis from outside the company. Government agencies also employ auditors in order to make sure that tax returns are correct. The typical tasks include looking for evidence of fraud, finding ways to reduce company costs, verifying financial information, and determining ways to fix any errors that are found.
Many large companies employ at least one internal auditor, as they need someone to oversee the job that the company accountants are doing. Such auditors are expected to compare the company's financial records with those of the banks and creditors who associate with the organization. Finding errors early on can help prevent major consequences that often come from having disorganized financial records at tax time. Since the typical penalties of missing such problems may include hefty fines for the company, it is often worth it to employ a full-time internal auditor.
Some companies are not profitable enough to hire a full-time auditor, but they still need help keeping their finances organized, and find ways to reduce costs, and identify money being continually wasted within the organization. Thus, they may use the services of an external auditor for part of the year, as this type of accountant deals with several companies at once on a contract basis. External auditors are seen as being more objective than internal auditors, since there is less possibility for a conflict of interest to occur; for this reason, it is not unusual for especially large companies to use the services of both internal and external auditors.
Individuals are just as affected by auditors as companies are, at least at tax time. This is because the government usually employs auditors to compare tax returns to pay stubs, bank statements, and other financial records to ensure that all sources of income have been reported and taxed properly. Unlike the type of auditor that a company may employ, this kind works in the interest of the government, not the individual or company being audited. Therefore, being audited usually has a negative connotation, though audits can be performed at random, so this process does not always imply wrongdoing. If, however, the auditor finds that the citizen purposely did not report all income to the government, the penalties include having to pay back taxes and fines, along with jail time in the most serious cases.