Every business needs constant checks and balances to ensure things are happening according to the law. Previously, we talked in detail about internal controls and their impact on a company. It is indeed a helpful practice, but we need more.
Perhaps an unbiased opinion from someone who isn’t a part of the company? Someone with relevant knowledge, expertise, and a free opinion. In audit terms, we call this vital person a third party auditor.
Third-party audits may be a requirement by law. Today’s article is focused on why businesses need a third party auditor, along with a bonus section on what makes them so important for the company.
What is 1st party 2nd party 3rd party audits?
I will try to explain first, second, and third party audit differences.
First party audit will essentially be an audit that the business itself performs. One good example is internal audit.
Second party audit is an audit by the business or on the business by some related entity. For example, the business performing audit of its contractors or suppliers does some audit of their business with the entity.
And third party audit is entirely independent of the business and the related entities. It is an unbiased and independent audit by an external body or external auditor.
If you plan to choose auditing as a career, a third party audit is a great choice. These people evaluate and assess your financial statements and declare a final opinion so that the relevant stakeholders can understand the corporation’s state.
A third party person is an independent entity with no personal interest in a business. They are transparent and are subjected to provide assurance and an unbiased opinion. We can say that a third-party auditor is free from any conflict of interest.
They confirm that a client’s financial statements follow relevant accounting principles. Is the business following IFRS, or did it follow GAAP? This can be an excellent third-party audit example.
Benefits of Using Third Party Auditors?
Third party auditing is a critical process that happens every year. Publicly traded companies are required by law to present their audited financial statements. If you own a small and private business under sole proprietorship or partnership. Auditing yields benefits, but it’s not a necessary requirement.
Here are the main pointers explaining the benefits of using third party auditors.
In an audit, independence and objectivity are correlated together. It is an attitude allowing auditors to perform their process without compromising the result. A third-party auditor follows strict protocols and guidelines to maintain objectivity. As a result, the client gets a clear and transparent opinion.
Third party auditors are known for their credibility because of relevant knowledge and no personal interests in the business. For example, they must not be a family member or own shares in the same company.
Another important reason third-party auditors are elemental is their understandability and ability to counter various business natures. A third-party auditor will perform procedures with best practices so that the audit report is easy to understand and interpret. Therefore it is mandatory to pick someone who stays within the trends and keeps their knowledge up to date.
Third party auditors reduce the stress on senior management and other people in the business by giving them an accurate and fair view. When companies are aware of their needs, it becomes less risky to make specific decisions. It acts as a guard against potential problems and provides sufficient knowledge to reduce business risks.
Since a third party auditor is there to double-check your records and internal controls, it becomes much easier to ensure accuracy. They will go through the details and give an opinion based on what you see instead of what you feel.
A third party auditor checks your efforts to ensure the company meets business goals. If a business is lost with no purpose, the audit report can set an intention for them. Third party auditors can also suggest opinions of what a company should do to improve its performance. This helps reach goals by defining a viable strategy.
Here is a list of things to accomplish to become a professional this party auditor according to ISO 19011:
First things first, you need to get educated about auditing. This is possible to develop your knowledge and skills. Get a degree in accounts and finance with an audit major. You can also opt for a postgraduate degree, but some prefer starting their work career. There are multiple diploma and certification options for users to explore and start their careers.
Once you complete your education, it’s time to start your work experience. Most people start polishing their skills with a company as an internee. You can opt for a small company with a simple employment process but lesser chances of progressing. However, there are some premium accounting firms spread across the globe offering third party auditing. Take up any training programs to elevate your skills to the next level.
After internships, auditors can start working as a team in charge or as conductors of the process. With more knowledge, auditors develop better judgment and problem-solving skills. Enhance your communication skills, stay transparent and focus on delivering the reports per the company’s instructions.
Third party auditors can have a stable and growing career by sticking with the right company. Make sure to use the right resources and communicate with your team and clients to become a well-known figure in the industry. Many auditors get to earn really good money and travel to different places. Maintain an optimistic attitude and plan your career accordingly.
A third party auditor has no personal interest in the company. They are independent resources that perform different procedures to give an opinion about a business’s financial statements. They can also give you an opinion on how to make things better.
They can have an excellent professional life that pays well. However, it comes with the need to educate yourself and become a stable professional. They are known to add independence to the annual FS review and present an unbiased opinion.
These auditors are educated professionals who can handle your statements and counter any problems. Businesses must provide third-party auditors with material that makes the entire process easier.
We hope you can find the perfect firm to start your career at one of the reputable 3rd party audit companies.