The Role Of An Independent Auditor Explained by Chris Gilmour

You may have heard of Independent Auditors who are required to audit certain business accounting systems and procedures. An Independent Auditors is like a referee of the financial reporting arena. If the CPA comes in, it might complete an audit of the business's accounting procedure, system and methods which will result, more often than note, with a report that is connected to the company's financial reports. For a publicly owned business they are required to have their annual financial statements audited by an independent CPA firm (Independent auditing firm). If any business privately owned have had audits completed, it is known to add credibility to their financial reports due to the independent "tag" associated with the report.

In the role of an auditor, the auditor will evaluate if the business's accounting practises are in accordance with the general accepted accounting principles, known as GAAP for short. In most cases they will find that everything is true and correct and the financial statement is a reliable and true document for financial and legal purpose. Sometimes however, an auditor might notice anomalies. They may notice the tell tale signs that a business has difficulty in functioning under normal operations and is in operational doubt due to what is referred to "Financial Exigencies". These can included a low disposable cash balance or an ever growing pile of unpaid overdue liabilities, maybe even lawsuits which the company will not the cash to cover.

A lot of auditors will exercise a certain amount of professional scepticism. This means that the auditor will dispute the business or company's accounting methods, procedures and practices with the aim of ensuring that the financial report is what is expected and adheres to financial accounting principles and legislation and ultimately that it is true, correct and not misleading. It is common that the independent auditor will state that the financial statement or report is "fairly presented" to reflect the independence of the report.

A lot of technical know-how is needed by a good auditor. You also need to have a knowledge of how to be strict regarding the accounting procedures of the client. The client's job really is to ensure that the shareholders are happier and that other users of the financial report are happy. The independent auditor has to ensure that the report it creates strictly upholds GAAP, and does not allow for any irregularities.

Many companies such as Enron have been discovered to engage in accounting fraud. That is that the fraud was not made apparent to the CPA auditors. In this case, Arthur Anderson, who was the auditing firm for Enron, was also found accountable and at fault because it destroyed important auditing evidence.

About the Author

Chris has several home business websites that promote valid working from home opportunities. He writes articles about finance, the ways to spot a home work scam, treating head louse and nits by using a home remedy for head lice and Italian lifestyle and culture including the various ways to learn italian.