What Auditors Cannot Do: A Comprehensive Guide

Auditors play a crucial role in ensuring the accuracy and reliability of financial statements. However, it’s essential to understand the limitations of their responsibilities to avoid unrealistic expectations. This guide will delve into what auditors cannot do, providing a clear understanding of their scope of work.

Auditors Do Not:

Assume Management’s Responsibilities

  • Authorize, execute, or consummate transactions
  • Prepare or alter source documents
  • Assume custody of client assets
  • Establish or maintain internal controls
  • Supervise client employees
  • Report to the board of directors on behalf of management
  • Serve as a client’s stock or escrow agent or general counsel
  • Sign payroll tax returns
  • Approve vendor invoices for payment
  • Design or modify financial management systems
  • Hire or terminate employees

Perform Management’s Tasks

  • Analyze or reconcile accounts
  • “Close the books”
  • Prepare confirmations for mailing
  • Select accounting policies or procedures
  • Prepare financial statements or footnote disclosures
  • Determine estimates included in financial statements
  • Determine restrictions of assets
  • Establish the value of assets and liabilities
  • Maintain permanent records
  • Prepare or maintain minutes of board of directors meetings
  • Establish account coding or classifications
  • Determine retirement plan contributions
  • Implement corrective action plans
  • Prepare for audits
  • Prepare the Statement of Functional Expense

Understanding what auditors cannot do is crucial for setting realistic expectations and ensuring a productive audit process. Auditors provide an independent opinion on financial statements, but they do not assume the responsibilities of management or perform their tasks. By adhering to these boundaries, auditors maintain their objectivity and integrity, contributing to the reliability of financial reporting.

What does an auditor do?


What is the auditor not responsible for?

The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not material to the financial statements are detected.

What type of services are auditors prohibited from performing?

Generally, all bookkeeping services, such as maintaining accounting records, preparing financial statements or preparing source data, are prohibited from being performed by an auditing firm.

What should you not expect from an auditor?

In practical terms, there are a number of tasks you should not expect your auditor to perform: Maintaining client permanent records, including loan documents, leases, contracts and other legal documents; Preparing or maintaining minutes of board of directors meetings; Preparation of the Statement of Functional Expense.

Do auditors really need to do more?

There is undoubtedly room for auditors to do more. While the current audit model does not involve any form of assurance or commentary on the full annual report – on the KPIs, the viability of an entity, or on the quality of its internal controls, among other things – none of these is impossible.

What does an auditor do before conducting an audit?

An auditor conducts assessments of processes, systems and information to validate their integrity and conformance to established policies and other criteria. To understand how to prioritize auditing efforts, an auditor might perform a risk assessment before conducting an audit.

What do Auditors look at in a business audit?

Auditors do not just look at evidence generated by the company. Confirmation of transactions and balances with third parties is a routine audit procedure, including confirmation of debtors, creditors, inventory and bank balances.

Leave a Comment