0 like 0 dislike
493 views
in Articles by
Indpendent CPA auditors are like referees in the financial reporting arena. The CPA comes in, does an audit of the business's accounting system and methods and gives a report that is attached to the company's financial statements. Publicly owned businesses are required to have their annual financial reports audited by independent CPA firms and any privately owned businesses have audits done as well because they know that an audit report will add credibility to their financial reports.

An auditor judges whether the business's accounting methods are in accordance with generally accepted accounting principles (GAAP). Generally everything is in place and the financial report is a reliable document. But at times an auditor will wave a yellow or red flag. Some indicators of potential trouble include when the business's capability to continue normal operations is in doubt because of what are known as financial exigencies, which could mean a low cash balance, unpaid overdue liabilities, or major lawsuits that the business doesn't have the cash to cover.

An auditor must exercise professional skepticism, meaning the auditor should challenge the accounting methods and reporting practices of the client in order to make sure that its financial statement conform with accounting standards and are not misleading - in short, that the financial statement are fairly presented. Indeed, the words "fairly presented" are the exact words used in the auditor's report.

A good auditor need technical know-how, but also needs to know how to be tough on the accounting methods of the client. His job is to be the agent of the shareholders and other users of the business's financial report. It's incumbent on an auditor to strictly uphold GAAP, and not let any irregularities slide.

There are a number of well-known companies that engaged in accounting fraud recently  and that fraud was not discovered by the CPA auditors. Enron is one of these companies. In this case, the auditing firm, Arthur Anderson was found guilty of obstruction of justice because it destroyed audit evidence.

Please log in or register to reply this topic.

Related topics

0 like 0 dislike
0 replies 500 views
0 like 0 dislike
0 replies 510 views
0 like 0 dislike
0 replies 382 views
0 like 0 dislike
0 replies 1.5k views
0 like 0 dislike
0 replies 540 views
0 like 0 dislike
0 replies 520 views
0 like 0 dislike
0 replies 489 views
0 like 0 dislike
0 replies 449 views
0 like 0 dislike
0 replies 444 views
0 like 0 dislike
0 replies 397 views
0 like 0 dislike
0 replies 449 views
0 like 0 dislike
0 replies 423 views
0 like 0 dislike
0 replies 419 views
0 like 0 dislike
0 replies 577 views
0 like 0 dislike
0 replies 553 views
0 like 0 dislike
0 replies 547 views
0 like 0 dislike
0 replies 536 views
0 like 0 dislike
0 replies 577 views
0 like 0 dislike
0 replies 566 views
0 like 0 dislike
0 replies 550 views
0 like 0 dislike
0 replies 539 views
0 like 0 dislike
0 replies 520 views
0 like 0 dislike
0 replies 545 views
0 like 0 dislike
0 replies 565 views
0 like 0 dislike
0 replies 515 views
0 like 0 dislike
0 replies 531 views
0 like 0 dislike
0 replies 560 views
0 like 0 dislike
0 replies 521 views
0 like 0 dislike
0 replies 533 views
0 like 0 dislike
0 replies 530 views
0 like 0 dislike
0 replies 495 views
0 like 0 dislike
0 replies 584 views
0 like 0 dislike
0 replies 534 views
0 like 0 dislike
0 replies 474 views
0 like 0 dislike
0 replies 483 views
0 like 0 dislike
0 replies 407 views
0 like 0 dislike
0 replies 431 views
0 like 0 dislike
0 replies 408 views
0 like 0 dislike
0 replies 403 views
0 like 0 dislike
0 replies 458 views
0 like 0 dislike
0 replies 447 views
0 like 0 dislike
0 replies 519 views
Connect with us:
...