A government auditor examines whether public funds were spent in accordance with the funds’ mandate. Internal and external auditors are the two types of auditors. Internal government auditors examine government agencies’ financial records to ensure that they are in compliance with financial regulations. External government auditors examine the activities of non-governmental third-party recipients of government funds to ensure that the funds were spent according to the agreements that govern the distribution of public funds.
Auditing is a process in which a financial expert, usually trained in accounting methods, examines and evaluates an entity’s financial records, financial transactions, and compliance with financial controls. Auditing is a mechanism used in the private sector to ensure that companies operate in the best interests of their investors rather than for the financial gain of insiders. In the public sector, auditing serves a similar purpose, with the caveat that any discrepancies discovered during an audit can result in criminal and civil penalties.
Government audits are concerned with the use of public funds, which are subject to greater scrutiny. Government agencies are typically given public funds for their own use or to distribute to third parties with the approval of a country’s legislative body. The authorization of funds is typically tied to a list of things that can and cannot be done with the money that is outlined in the specific authorization as well as any overarching government fiscal policy that pertains to the allocation. For instance, a specific funds authorization may allocate money to a veteran’s administration to encourage small business development, but a general governmental policy may prohibit public funds from going to any vendor that discriminates in its hiring practices. The government auditor would have to ensure that the funds were used in accordance with the funds authorization, as well as with general governmental policies.
Internal government auditors are usually tasked with auditing a single agency or a specific allocation of funds to multiple agencies under a single legislative authorization. They enter the agency and complete a checklist of tasks, including reviewing financial expenditures and determining adherence to financial protocols. An internal government auditor spends the majority of his time reviewing the agency’s record-keeping to ensure that public funds are not being misused.
Vendors, grantees, and contractors who receive government funds typically have their activities and financial records audited external government auditors. In a government setting, the difference between internal and external auditors is that the external auditor must usually also assess whether the government is getting its money’s worth. An external government auditor assigned to audit a government health care reimbursement program, for example, must not only determine whether the financial affairs are in order, but also examine how medical care is delivered to ensure the government is not being defrauded.