Underwriter vs Auditor: What’s the difference?

Underwriters and auditors are separate and distinct jobs. While in some cases they may work on the same projects, they work under different scopes. Underwriters deal with risk and uncertainty, while auditors work with financial standards.

An underwriter determines the value of risk involved in loans or insurance coverage, whereas an auditor ensures that a company’s financial statements are compliant with Generally Accepted Accounting Principles (GAAP) and relevant tax laws. Though usually separate jobs, auditors do, on some occasions, review underwriters’ methodologies to ensure they meet financial standards.

Where do underwriters and auditors work?

Underwriters and auditors do not work in the same place. In general, an underwriter works for a commercial bank, an investment bank, or an insurance company. Auditors, on the other hand, work for auditing firms, since their value as impartial evaluators works only insofar as they remain disconnected from company politics and hierarchy.


There are some exceptions. An underwriter may also work for an auditing firm if she audits banks and insurance companies. While she would not perform underwriting exercises for operational use, her work may be used to ensure the audited company (the client) has correctly recorded underwriting activities on its financial statements.

Auditors may also be hired by operational companies themselves as internal auditors. However, they may perform auditing activities outside the traditional scope of financial statements, such as IT Security.

Roles and Responsibilities

Underwriters and auditors do not usually work together. Their roles and responsibilities occur in separate company workflows. We can thus define their roles independently for the most part and on a joint-basis for the rare cases they work together. Let’s look at this more closely next.

RoleDetermine ROI needed for insurance and loans by analyzing riskEnsure client finances meet GAAP and tax lawsAuditor ensures underwriting calculations meet GAAP standards
ResponsibilityAnalyze risk based on set and variable criteria (listed below)Cross-check bookings, reconcile account balances, and verify calculation methodologiesAuditor must examine the calculations and justifications, and the underwriter must provide ALL relevant information
WorkplaceInsurance company or bankAuditing firmAuditing firm working for an client in insurance banking

Let’s examine these scenarios below.

Underwriter Role and Responsibilities

Underwriter Role

The role of an underwriter is to determine the required return on investment for a bank or insurance company. While financial analysts often perform ROI calculations on project proposals within a company, an underwriter must meet rigid criteria in her analyses due to the external nature of the work.

Underwriters must determine the price tag on a financial security — usually debt and insurance — that will be offered to another company or an individual. Because they’re servicing external parties, they must ensure their analysis is correct to the highest degree of detail.

Underwriter Responsibilities

To fulfill their role, underwriters spend most of their time performing calculations to estimate risk. In the case of loans, for example, these calculations determine (1) if a client can afford the loan, and (2) how risky it is. The underwriter answers these two criteria by evaluating the client’s risk profile, which consists of:

  1. On-time payment history.
  2. Rolling credit facility payment history (credit cards).
  3. The lender’s credit policy, which changes on a cyclical basis.
  4. Market conditions.

It’s important to note that an underwriter’s risk evaluation depends to some degree on the company’s tolerance. In favorable macroeconomic conditions, the lender may choose to weight certain risk criteria with less importance.

Auditor Role and Responsibilities

Auditor Role

An auditor’s role is to ensure his client’s financial activities are recorded in compliance with GAAP and tax laws. While a full explanation of these standards is impossible to list here, the core principles can be summarized with the 13 accounting principles:

  • Accrual principle – transactions are recorded when the service or expense occurs, not when cash is received.
  • Conservatism principle – losses are recorded when they’re possible to occur, whereas gains are only recorded when they are certain.
  • Consistency principle – “like” transactions are recorded the same way over time.
  • Cost principle – the value of assets is always recorded at the price for which they were purchased, not their value over time.
  • Economic entity principle – a company’s finances should be the only ones appearing on the financial statements, which means shareholder and stakeholder finances should never appear. The one exception to this is consolidation accounting, where affiliate companies roll up into the group parent.
  • Full disclosure principle – all relevant and necessary info must be included in the financial statements and associated commentary.
  • Going concern principle – assumes that a company will continue to fulfill its financial obligations in the next period and several thereafter, meaning it is a “going concern.”
  • Matching principle – costs should always be included on the financial statements in the period in which the related revenue is earned. Expenses not related to revenue should be recorded in the period they are used up.
  • Materiality principle – sometimes following the rules for GAAP would be extremely strenuous and expensive, and following them would not have a real impact on a transaction. The materiality principle states that only items that would have a real impact on financial results, i.e “material” items, must follow the rules. Depreciating a $10 table, for example, would not have a material impact on financial results, so it’s immaterial.
  • Monetary unit principle – the idea that every transaction in a company can be assessed by a currency as a unit of measure.
  • Reliability principle – all information shown in the financial statements must be reliable.
  • Revenue recognition principle – revenue is recognized when the service or product is delivered, not when cash is received.
  • Time period principle – states that a company should choose a time period, whether months, quarters, or years, in which to report company financials. The most common is a financial year.

Auditor Responsibilities

The responsibilities of an auditor consist primarily of cross-checking bookings, reconciling account balances, and verifying calculation methodologies at various places in the trial balance. An auditor looks at these three items through the lens of the 13 accounting principles.

It’s important to note, however, that an auditor does not investigate the totality of the financial statements. Instead, they collect only a sample for investigation. The inverse, for all practical intents and purposes, would be impossible.

Underwriter & Auditor Roles and Responsibilities

On some occasions, underwriters and auditors work together. An auditor may review an underwriter’s calculation techniques, which means the two must cooperate on a single project. More often than not, the auditor in this exchange is a former underwriter.


The auditor must ensure the calculation is correct, and the underwriter must provide all relevant information about the analysis, as well as commentary as to why he or she performed the analysis in this way specifically.


Specifically, the underwriter is ultimately held responsible for the reliability of the information she/he provides to the auditor, whereas the auditor is responsible for correctly understanding the degree to which the underwriter’s calculation meets GAAP.

If the underwriter provided inaccurate information, the auditor would not be able to perform his/her work, and the underwriter would be responsible for this. If the auditor misses a mistake in the underwriter’s methodology, the financial statements would be incorrect, and the auditor would be held accountable.


On average in major cities across the globe, underwriters make 10% more than auditors. I’ve compiled a list of salaries from the largest cities on each continent. It’s available below.

CountryCityUnderwriter SalaryAuditor Salary
United States of AmericaNew York $                 68,522 $      62,460
United States of AmericaLos Angeles $                 64,336 $      59,973
United States of AmericaChicago $                 64,172 $      57,499
United States of AmericaHouston $                 63,040 $      56,346
United States of AmericaPhoenix $                 55,655 $      53,776
United States of AmericaPhiladelphia $                 60,108 $      56,612
United States of AmericaSan Antonio $                 59,910 $      53,396
United States of AmericaSan Diego $                 59,693 $      58,473
United States of AmericaDallas $                 56,697 $      56,516
United States of AmericaSan Jose $                 63,321 $      64,020
EnglandLondon $                 62,679 $      52,972
GermanyBerlin $                 58,988 $      66,292
SpainMadrid $                 33,868 $      29,176
ItalyRome $                 37,715 $      38,448
FranceParis $                 55,628 $      53,689
AustriaVienna $                 51,576 $      34,315
GermanyHamburg $                 60,984 $      73,807
United Arab EmiratesDubai $                 32,400 $      22,680
IsrealTel Aviv $                 83,200 $      30,539
ChinaBeijing $                 43,959 $      13,937
IndiaMumbai $                   9,890 $        9,615
South AfricaJohannesburg $                 11,311 $      20,400
KenyaNairobi $                 10,101 $      10,920
ArgentinaBuenos Aires $                        16 $        9,108
BrazilRio de Janeiro $                   6,943 $      21,960

Job Satisfaction Ratings

According to a recent study, auditors have slightly more satisfying and meaningful jobs than underwriters.

Underwriters have a 70% job satisfaction rating, and a 37% estimation of high meaningfulness of their job. Auditors, on the other hand, have a 71% job satisfaction rate and a 38% estimation of high meaningfulness of their job.

In this study, Percent High Satisfaction is the percentage of respondents with the given job who answered “Extremely satisfied” or “Fairly satisfied” to the question, “How satisfied are you in your job?” 

Likewise, Percent High Meaning is the percentage of respondents with the given job who answered “Very much so” or “Yes” to the question, “Does your work make the world a better place?”

Stress Levels

Auditors are more satisfied than underwriters, but this begs the question, why? One critical factor is stress.

Pressure from above

Auditors and underwriters have the same “type” of pressure. They both perform critical functions in the revenue-generation workflow for their company. If they’re stuck, the company does not make money. This comes with a significant amount of pressure to perform.

Need for Precision

Additionally, both roles deal with complex logic and quick mathematics. What this means is it’s easy to make a small mistake that can lead to a misunderstanding. That said, underwriters and auditors alike have fail-safes in place at many levels to ensure little errors don’t slip through the cracks, but this can carry a degree of stress.

Communicating rejections

After speaking with members of the underwriting an auditing community, it’s clear that the strongest source of stress is having to reject people. Underwriters have to reject individuals looking for loans, or small business owners who need support with working capital and short term cash flow needs.

So what ultimately makes auditors more satisfied and instilled with a stronger sense of meaning in their work? Those I questioned all mentioned a sense of accomplishment associated with closing audits. The team comes together to celebrate, which builds meaning for the one, as well as for the many.

Career Outlook

According to the U.S. Bureau of Labor Statistics1, the demand for underwriters will grow by 3% from 2019 to 2029 (average growth of the market), and the demand for auditors will grow by 4% in the same period.

Both of these jobs is around the average growth rate of all industries, which means they are highly correlated to the natural growth of the market.

  1. USBLS []

About the Author


Noah is the founder & Editor-in-Chief at AnalystAnswers. He is a transatlantic professional and entrepreneur with 5+ years of corporate finance and data analytics experience, as well as 3+ years in consumer financial products and business software. He started AnalystAnswers to provide aspiring professionals with accessible explanations of otherwise dense finance and data concepts. Noah believes everyone can benefit from an analytical mindset in growing digital world. When he's not busy at work, Noah likes to explore new European cities, exercise, and spend time with friends and family.


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