An external auditor performs independent, third-party reviews all the financial records of a company or corporation. He evaluates all accounting, payroll and purchasing records, as well as any documents related to investments, stocks or loans. His job is to provide an accurate, unbiased analysis of the company’s financial condition.

The objectivity of an external auditor is imperative for him to be successful. No connection to the company is permitted, as it may be construed as biasing the auditor’s report. This detachment generally means he cannot be a friend or relative of any owner, manager or employee. He must not hold stock in the company or have any monetary stake in any of their subsidiaries or holdings.

To be fair and equitable, an external auditor should familiarize himself with the nature of the business he is auditing prior to starting the job. For example, service industries and consumer goods companies have markedly different expenses as well as disparate methods of calculating profits and losses. Being aware of these differences is important for his conclusions to be accurate and constructive.

Businesses often depend on an external auditor to be their financial judge and jury. His findings strongly influence the company’s reputation in both the private and public sectors. If his conclusions about assets, debts and tax responsibilities and payment do not match those on the company records, the repercussions can be serious.

If an external auditor finds irregularities, he documents them and makes notes on suggested improvements. These may relate to accounting methods, internal controls or spending habits. Other areas of concern commonly relate to how employees are classified and paid. For example, companies sometimes incorrectly categorize jobs as exempt, not requiring overtime pay, when they are actually non-exempt positions. He may also make suggestions on reducing overhead through staff reductions or better inventory control.

In some instances, an external auditor’s services are required by a regulatory agency or shareholders that have doubts about the accuracy of a company’s financial claims. If he finds evidence to support their suspicions, he is typically bound to report them. The company is generally given the opportunity to defend their position either in writing or in oral presentations.

Once the auditor’s job is completed, he presents his findings to management. The areas his report normally covers include the state of accounts payable and receivable as well as his opinion of the record-keeping systems and the company’s financial strength. His comments on these topics are generally expected to be constructive and include recommendations for improvements.

Most external auditor positions require the applicant to be a certified public accountant. Other jobs may require a bachelor’s degree in accounting or finance. Experience in auditing, financial analysis or business administration is also valuable.