The auditors of the Center for Independent CPAs are like judges in the financial reporting field. The CPA comes in and conducts an audit of the company’s accounting system and procedures and provides a report attached to the company’s financial statements. Public enterprises need to audit their annual financial reports by independent CPAs, and any private business has audited because they know that an audit report adds credibility to their financial statements.
The auditor determines whether the accounting practices of the business are in accordance with generally accepted accounting principles (GAAP). Generally everything works and the financial report is a reliable document. But sometimes the auditor will raise a yellow or red flag. When there are doubts about the ability to continue the business as a result of what is known as a financial need, a low cash balance, unpaid liabilities, or major cash outflows to cover the business.
The auditor must enforce professional doubts, which means that the client’s accounting practices and reporting practices must be challenged to ensure that the auditor general’s financial statements are consistent with accounting standards and are not misleading – in short, the financial statement is presented in a fair manner. In fact, the words “slightly presented” are the exact words used in the audit report.
A good auditor requires technical know-how and a strong knowledge of client accounting practices. His job is to be the representative of shareholders and other users of the business’s financial record. It is the responsibility of an auditor to ensure GAAP is strict and do not let any irregularities slip.
There have been a number of well-known companies that have recently been involved in account fraud, which have not been discovered by CPA auditors. Enron is one of these companies. In this case, the audit firm Arthur Anderson was found guilty of obstructing justice because it destroyed audit evidence.