Auditors are individuals who have a thorough understanding of a company's financial and business situation.
From the late 13th to early 14th centuries, the auditing profession emerged in England. At this time, auditors worked for shop owners, their job being to verify the accuracy of income and expenses, as well as the annual profits of the shops.
This helps owners avoid losing profits and verify the accuracy of the profits generated by their businesses after a certain period of operation. Thanks to the figures provided by the auditing team, business owners can adjust their business plans.
The development of the auditing industry has always closely followed economic development, especially during the first industrial revolution, when the operating models of many private companies in Europe were still incomplete. The demand for auditing increased significantly, so auditing gradually became a profession, rather than just a department of a bank, investment fund, or employee of a major corporation.
Gradually, independent auditing firms providing auditing services emerged.
Auditors are the individuals who provide opinions on the fairness and accuracy of financial statements.
The need for auditing arises from the fact that business owners (shareholders) cannot and do not need to personally review all the financial information of their business, as it is the responsibility of the business directors to prepare and report to them. Therefore, they appoint auditors – individuals with sufficient professional competence, independence, and objectivity – to independently examine and report back their opinion on the fairness and accuracy of the financial statements.
With the development and diversification of the economy, financial information is used for various purposes by different stakeholders. However, all users of audit results need assurance that the financial information provided to them is truthful and reasonable. Therefore, auditors must provide an independent audit opinion based on the audit findings regarding the truthfulness and reasonableness of the financial information prepared and presented in the financial statements.
Specific qualifications must be met to be allowed to perform the work.
Independent auditing is performed by professional auditors; this work does not create additional information about financial statements but only increases the reliability of those statements. To practice auditing, auditors must absolutely meet the following specific requirements.
Requirement for independence
This requirement is considered a necessary condition for achieving the objectives of auditing; independence is a fundamental principle of professional conduct for auditors. Audit results are worthless if those using the results believe the audit lacked independence, regardless of how highly qualified the auditor was.
Requirements regarding moral character
Auditors must possess professional ethics, always working with the utmost caution and diligence. Any negligence can lead to audit risks, thereby affecting users of the audit report and the auditor's legal liability. The audit process must be conducted honestly and with clear opinions. At the same time, auditors must be fair, respect the law, respect the truth, and avoid bias.
Requirements regarding skills and expertise
The fundamental principle governing auditing requires auditors to perform their work with the necessary expertise… To ensure the collection of sufficient and appropriate audit evidence, auditors must possess solid professional expertise and knowledge of the client's business, auditing skills and experience, and legal knowledge.
Those who use audit results trust and appoint auditors because of their independent professional conduct, professional competence, and ethical integrity and objectivity in their work.
"Advisors" to big bosses
The auditing profession is closely linked to the development history of many large corporations around the world, as well as the prosperity of Western nations throughout centuries of change.
Thanks to auditing firms, major corporations can find suitable businesses to invest in. Auditors are also the ones who uncover loopholes that cause profits in corporations to be lost or recorded inappropriately.
Furthermore, sometimes auditing firms themselves provide opportunities for financially struggling companies to transform. Thanks to the advice of auditors, financially troubled companies gain a clear understanding of their situation. They then gradually address gaps in cash flow management and implement restructuring to improve their business operations. They may even help companies find suitable partners during mergers and acquisitions.
A market economy requires businesses of all economic sectors to have accurate, timely, and reliable information for their management and operations. This highlights the increasing importance of auditors, corresponding to the diverse transformations and developments of today's economy.