People get it wrong most of the time.
Photo by The Creative Exchange on Unsplash
In this post, I’m going to debunk some common misconceptions that people have when it comes to accountants and auditors. Some people may not agree with me on this. But I speak from experience. And I speak for accountants and auditors who share the same sentiments but get tired of explaining to people.
If you’re an auditor, you’ll finally have something to use as third-party evidence when people ask you about your profession. I hope that this post is reliable and sufficient for you.
There was a time when BS Accountancy was trending on Twitter. People were quick to share their stories about this underrated profession.
I understand why.
If you’re an Accountancy graduate like me, you’ll feel that you got scammed into entering something that you regret later on. The feeling is the same as being asked, “Are you open-minded?” by one of those networking guys.
Only that…the conversation went like this:
Your mom/dad/sibling/close friend/teacher/relative: “Are you good at Math?”
You: “Yup!”
Your mom/dad/sibling/close friend/teacher/relative (in an excited voice): “Then, you should enter accountancy (or engineering)! But accountancy is best if you want to get rich quick! You just have to sign and people will pay you to do it!”
Don’t even bother changing the answer to “no”. I did say “no” and I got this rationalization instead:
It’s okay if you’re not good at Math. Challenge yourself to do something that you’re not good at. Go on and take Accountancy.
"I'm an auditor."
When people often ask me, ‘‘what’s your profession”, this is my response: “I’m an auditor”.
People only have two default reactions to this:
“Ha? Ano yun? (Huh! What’s that?)”
or
“Ah…auditor. So CPA ka pala? Ang yaman mo na siguro. (Ah, so you must be a CPA*. You must be rich already).”
The most ridiculous reaction I received was this: “Hey, don’t you fix the client’s books so that they can evade BIR** taxes?”
That’s a little bit offending.
But…in a polite and gracious tone, I did my best to explain to that person, in layman’s terms, exactly what I do.
Next time I get asked (and also when you get asked), I’ll simply point them to this post. You’ll never have to explain yourself again.
#1 Auditors are always accountants, accountants are always auditors.
If you mastered the art of taking tests, especially true or false questions, you’ll know that statements with an “always” on it almost always tend up to be false.
(To give you a hint, both statements are false.)
Accountants here refer to those people who earned the Certified Public Accountant’s title.
In the Philippines, it takes a CPA title at least, to enter an audit firm. Although the rules are starting to change now because of K- 12 and the projected decrease of Accountancy students taking the CPA Licensure Exams (CPALE) in the coming years.
Thus, auditors are mostly CPAs in the Philippines, unless otherwise changed. But a CPA does not always have to become an auditor in any of the Big 4 firms.
Many career options are available to a CPA which include (but not limited to):
- external auditor or tax auditor in a public accounting firm (the top choice for most);
- accountant or internal auditor in a private firm (for those who got tired of the public accounting firm);
- accounting teacher in a university (for those who love teaching and for those who plan to return the same terror that they received as students);
- government auditor (for those who wanted to make a difference in the Commission of Audit);
- lawyer (for those who took up law because Accountancy is an excellent pre-law major);
- independent practitioner (for those who went solo and put up their firms);
- content creator (like me).
#2 Auditors fix the books.
No, they shouldn’t!
An auditor’s primary responsibility is to provide an opinion on the client’s Financial Statements (FS) as to whether it is fairly presented in accordance with the applicable financial reporting framework.
Okay, let’s break it down before things get too technical.
“To provide an opinion” is not as simple as indicating that the FS is clean. It involves a lot of behind-the-scenes activity (and lots of sleepless nights) to arrive at the proper opinion.
Behind-the-scenes activities are those prescribed by International Standards on Auditing (ISA) or by the United States Public Company Accounting Oversight Board (PCAOB) for most US companies.
If you’re a company owner, the succeeding explanation is important to you.
What is an opinion? The ISA provides four:
- Unqualified – your FS is clean.
- Qualified – your FS is clean except for some minor problems.
- Adverse – your FS is clean except for some major problems.
- Disclaimer – we refuse to give an opinion on your FS (that’s equivalent to saying that your FS is dirty as hell).
“Fairly presented” is like saying that your books did not violate the accounting’s commandments. Applicable financial reporting framework usually pertains to the Philippines (or International) Financial Reporting Standards (PFRS/IFRS).
PFRS/IFRS is the bible for accountants. Auditors also check this bible from time to time to see whether your accountant did his/her job.
If there’s any fixing to do, the company’s accountant (not the auditor) has the main responsibility to adjust the books.
#3 Auditors prepare and compile financial statements.
Auditors take this commandment religiously: be independent.
Technically, auditors are not supposed to prepare or compile the client’s financial statements (see explanation under item 2). That would violate the independence rule.
If you’re an auditor and your clients keep on insisting, point them out to ISA 200 and to these excerpts:
“…an audit in accordance with ISAs is conducted on the premise that management and, where appropriate, those charged with governance have acknowledged and understood that they have responsibility for the preparation of the financial statements in accordance with the applicable financial reporting framework, including, where relevant, their fair presentation;”
I know. I know. They’re too technical. Your client will snore.
And besides, pointing out these excerpts rarely makes a difference. If you’re in doubt about what to do, you need the more advanced skills of handling this type of situation. Go on and ask your bosses about it.
#4 Auditors prepare tax returns
Just like with the FS, auditors are not supposed to prepare tax returns.
Large clients often have their tax specialists to do it for them. Small to medium-size companies are not so lucky so they tend to rely on auditors to enlighten them. Thus, it becomes part of an auditor’s value to check on the tax portions of the FS. At some point, the lines between checking and preparation even become blurry.
#5 Auditors sign opinions easily.
If you’re just a newly-passed CPA, you wouldn’t be signing any report, not until you become a partner of the audit firm that you’re working with. In the Philippines, that’s more than ten years waiting-time (if you’re serious) or seven to eight years at least (if you’re insanely good).
If you want to sign a report of your own, you better go out and establish your firm. But it will also take years before you get it off the ground. Besides, you need to take another level of certification that requires at least three years of meaningful work experience.
#6 Auditors are boring people.
Movies and books propagated the image that accountants are boring people who wear standard black and white suits and a serious frown. It follows then that auditors are the same.
Well, not exactly. I might be a boring person (but I have my own happy hour). I know colleagues who laugh a lot, dance, and sing like crazy and even cross-dress during parties.
And…when auditors go out for meals, they’re the most boisterous lot. Like you do, they engage in office gossip, discuss the latest K-drama or American series, or simply discuss how their crazy day went.
Here’s a fun fact. Bestselling author John Grisham was an accountant before he became a lawyer.
#7 Auditors get a lucrative salary.
This is—probably—the biggest misconception of all.
If you don’t care about salary, feel free to skip.
If you care about salary, I hate to burst your bubble but being a CPA (and much more being an auditor) is not a get-rich-quick scheme (at least, in the Philippines). Don’t believe your parents or anybody who tells you otherwise.
You get the same warning for any clean profession. So, don’t worry too much.
Before you get your worth as a CPA, you have to pour in lots of effort, hard work, and dedication. This will help you get promoted fast. And when you feel valuable enough, you can either transfer for work abroad or hustle on your own.
Final Thoughts
There you have it—seven common misconceptions about auditors that you should now, whether you’re an auditor yourself, an accountant, or a client who wants to understand your auditors better.
If you’re the auditor, do your best to explain what you do in layman’s terms. Or you can simply point them to this blog post.
But if you’re in a family gathering, don’t ask them to read. They’ll not cut the conversation with you just to do that. Rather, summarize my best points and explain (as calmly as you could) what is it that you do.
If you’re able to do it well, they wouldn’t ask again their second most common question:
“When are you going to get married?”
Your explanation already said it all.
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*CPA=Certified Public Accountant or those three letters that accountancy students are fond to write at the end of their names while still in the university or review center
**BIR=Bureau of Internal Revenue, the Philippine government taxing body
Disclaimer of opinion: The opinions and views expressed in this article are solely owned by the author. It does not reflect the opinions and views of the audit firm to which she is associated with.
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P.S. Did you audit this article and spot any mistakes or inconsistencies or points that you agree or disagree with? Comment below and let’s engage in a healthy discussion.
Article originally published on LinkedIn on May 14, 2020.
