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The three broad groups of auditors are external, internal, and governmental. External auditors are certified public accountants (CPAs) licensed by their states to provide auditing services. The CPA profession has played an active role in developing and providing attestation, assurance, and auditing services. The American Institute of Certified Public Accountants (AICPA), a voluntary national professional organization, represents the accounting profession in the United States, in general, and the public accounting profession, in particular. The AICPA publishes books, journals, and other materials, manages a Web site (http://www.aicpa.org), lobbies legislators, and sets professional standards in a number of areas. State professional societies (e.g., the New York State Society of CPAs) provide a range of professional support at the state level.
The AICPA Code of Professional Conduct guides the CPA in the performance of professional services, including audits. The code consists of principles, rules, interpretations, and rulings, going from the very broad to the very specific. There are six ethical principles of professional conduct (e.g., integrity) that provide the basis for the rest of the code. The rules address more specific ethical concerns (e.g., independence). The interpretations provide more details regarding the rules (e.g., conflicts of interest). Rulings are answers to specific questions (e.g., may a CPA accept a gift from a client?). In addition, the AICPA has an elaborate enforcement mechanism in place to ensure compliance with the Code of Professional Conduct.
One of the most important provisions of the code is that external auditors must be independent of their clients when performing financial audits. According to Article IV of the AICPA's Code of Professional Conduct, "a member in public practice should be independent in fact and appearance when providing auditing and other attestation services" (http://www.aicpa.org). To be independent in fact, an auditor must have integrity; a character of intellectual honesty and candor; and objectivity, a state of mind of judicial impartiality that recognizes an obligation of fairness to management and owners of a client, creditors, prospective owners or creditors, and other stakeholders. To be independent in appearance, the auditor must not have any obligations or interests (in the client, its management, or its owners) that could cause others to believe the auditor is biased with respect to the client, its management, or its owners.
Internal auditors are employees of individual organizations. To increase internal auditors' objectivity, typically, internal auditors report to the audit committee of the board of directors, rather than to the management. Internal auditors are primarily involved in completing operational and compliance audits, although some perform financial audits of segments of their companies. The Institute of Internal Auditors (IIA) is an international professional organization representing the internal auditing profession. The IIA publishes materials, encourages local chapter activities, offers certification as a certified internal auditor, and provides general support for practicing internal auditors.
Government auditors are employed by a particular agency of local, state, or federal government. Government auditors are primarily involved in performing compliance audits. Internal Revenue Service (IRS) auditors and Government Accountability Office (GAO) auditors are the most visible government auditors. IRS auditors examine tax returns to ensure that organizations and individuals report their information in compliance with the Internal Revenue Code. The GAO is an arm of the U.S. Congress that responds to Congressional requests for oversight, review, and evaluation of federal agencies and recipients of federal funds. Thus, GAO auditors often determine whether the agency being audited has spent the money in a manner that is consistent with Congressional mandates.
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