Understanding the Auditor's Report
Understanding the Auditor's Report
If all the facts concerning financial transactions were properly and accurately recorded and if the owners and managers of business enterprises were entirely honest and sufficiently skilled in matters of accounting and recording, there would be little need for independent auditing. However, human nature being as it is, there probably will always be a need for the auditor. Many businesses, depending on size and nature, employ internal auditors. Their responsibilities and functions, while similar to those of an independent auditor, are vitally different in a major respect having to do with impartiality and independence. For the purpose of this discussion the terms accountant, auditor and certified public accountant (CPA) are used interchangeably and only refer to the "outside" independent auditor.
The Role of the Auditor
Dependable financial information is essential to the very existence of our society. The credit professional making a decision to grant trade credit, the investor making a decision to buy or sell securities, the banker deciding whether to approve a loan, the government in obtaining revenue based on income tax returns, all are relying upon information provided by others. In many of these situations, the goals of the providers of information run directly counter to those of the users of the information. Implicit in this line of reasoning is recognition of the social need for independent auditors - individuals with a professional competence and integrity who can tell us whether the information on which we rely constitutes a fair picture of what is really going on.
Good accounting and financial reporting aid society in allocating its resources in the most efficient manner. The goal is to allocate our limited capital resources to the production of those goods and services for which demand is greatest. Economic resources are attracted to the industries and organizational entities that are shown by accounting
If all the facts concerning financial transactions were properly and accurately recorded and if the owners and managers of business enterprises were entirely honest and sufficiently skilled in matters of accounting and recording, there would be little need for independent auditing. However, human nature being as it is, there probably will always be a need for the auditor. Many businesses, depending on size and nature, employ internal auditors. Their responsibilities and functions, while similar to those of an independent auditor, are vitally different in a major respect having to do with impartiality and independence. For the purpose of this discussion the terms accountant, auditor and certified public accountant (CPA) are used interchangeably and only refer to the "outside" independent auditor.
The Role of the Auditor
Dependable financial information is essential to the very existence of our society. The credit professional making a decision to grant trade credit, the investor making a decision to buy or sell securities, the banker deciding whether to approve a loan, the government in obtaining revenue based on income tax returns, all are relying upon information provided by others. In many of these situations, the goals of the providers of information run directly counter to those of the users of the information. Implicit in this line of reasoning is recognition of the social need for independent auditors - individuals with a professional competence and integrity who can tell us whether the information on which we rely constitutes a fair picture of what is really going on.
Good accounting and financial reporting aid society in allocating its resources in the most efficient manner. The goal is to allocate our limited capital resources to the production of those goods and services for which demand is greatest. Economic resources are attracted to the industries and organizational entities that are shown by accounting