Professional auditors generally examine various accounting records, bank statements, financial databases and other sources of financial information in an effort to ensure compliance with various banking laws. Some equate the necessity of a business audit to that of an annual health checkup for people. A company’s healthy balance can actually make or break its future successes (or failures). Auditors incorporate standard accounting principles as they go about providing assurances that a company’s statements are accurate and the company is in legal compliance. Every organization, generally speaking, is required to provide documentation via its financial reports to not only company shareholders, but also to various tax agencies, such as the Internal Revenue Service, the media and the company’s employees.
Often, and especially over the past several years, the demand for forensic accountants has grown and many of these financial professionals are finding themselves working alongside auditors in an effort to rectify discrepancies or to uncover illegal activities such as embezzlement and/or money laundering. Recent American cases, including the Enron and the more recent Bernie Madoff scandals, have resulted in tighter restrictions and new guidelines, especially within the U.S. Incorporating “generally acceptable accounting principles”, also known as GAAP, auditors and accountants will ensure a company’s management team is keeping a transparent approach to all of its business dealings. Further, auditors also ensure disclosures are made when necessary and in the proper format and context. While an internal audit will not necessarily negate the audits conducted by various federal agencies, they can surely allow for a smoother experience.
Most companies are aware that many certified public accountants approach their books with skepticism, or at a minimum, no preconceived notions of what they might or might not uncover. The best business accountants and auditors will maintain that stoic, yet professional, approach in order to provide an accurate audit.
In general accounting terms, the team of auditors and/or professional accountants will provide a “grade” or conclusion on the company’s financial well being:
Qualified – The auditor was not able to gain full access to complete the audit or the statement is not considered satisfactory according to general accepted accounting principles
Unqualified – The auditor is designating the audit as sound with no major problems or discrepancies in the financial statements
Disclaimer – The auditor was unable to form an acceptable opinion on the fairness of the statements
Adverse – The financial statements provided to the auditor are not in compliance with general accepted accounting practices and do not fairly represent the company
Without financial audits by professional auditors, determining the credibility of businesses, whether national or global, is not possible. Auditing practices are carefully developed in an effort to gauge credibility, legality, success or when suspicious activities threaten the business. Not only that, but in some countries, including the United States and the United Kingdom, the media plays a significant role in the form of a “public watchdog” and will report illegal activities by any company. The financial records are the one place where misstatements, mistruths or inaccuracies can be found.