|
 |
Certified Public Accountant (CPA)
The CPA as an Auditor
Firms may use the audited financial statements when applying for bank loans or when undertaking a major financial reorganization of the company. Audits are important decision-making tools for management and investors alike, as they identify existing and potential problems. An audit is designed to bring objective, professional expertise to the financial reporting process. This helps prevent companies from issuing misleading financial statements. Of course, there can be no guarantee that all fraud will be found. However, an audit is planned and performed with an attitude of professional skepticism and is designed to provide "reasonable assurance" that the financial statements are free of significant errors or fraud. For the auditor to express an opinion on the reliability of the financial statements of any company, the CPA must understand events, transactions and practices that have an important effect on the financial statements. This requires a careful look at a company's internal accounting control structure over financial reporting. If a construction company claims it owns 53 pieces of heavy equipment worth $6 million, the auditor may put on a hard hat and "go into the field." At the end of the audit, the CPA -- exercising professional judgment and drawing upon knowledge of the business -- reaches a conclusion. This is the "bottom line" in the audit the opinion expressed in the auditor's report. If the auditor finds the financial statements are fairly presented in conformity with generally accepted accounting principles, then a "clean" or unqualified opinion is issued. Under certain circumstances, the auditor may elect to qualify the opinion, stating clearly those matters preventing the expression of a "clean" opinion. Reprinted with permission of The Ohio Society of CPAs. The CPA and Fraud Detection As a result of scandalous accounting practices -- Enron and WorldCom, to name a few -- a strict corporate governance law was passed, the Sarbanes-Oxley Act of 2002. These new standards place much more responsibility on auditors of publicly-held companies, with trickle-down effects for privately-held companies. But this also enforces the CPA's powerful role as the protector of shareholders' interests. Joseph T. Wells, the founder and chairman of the Association of Certified Fraud Examiners, writes in a recent Journal of Accounting article: "Accepting that fraud deterrence and accounting are related but distinctly different disciplines, the auditing profession could utilize the unique skills of antifraud specialists on public audits. Virtually all of the major accounting firms currently employ such specialists. However, they are now being used reactively instead of proactively." Wells contends, "If you accept the postulate that fraud prevention and internal control are not exactly the same -- and they aren't -- then the accounting profession needs to learn more about preventing fraud." The AICPA has teamed up with the ACFE for several antifraud initiatives and programs since the Sarbanes-Oxley Act was signed into law. A growing trend is for CPAs to gain extensive fraud detection and prevention knowledge; this may mean certification as a Certified Fraud Examiner. The AICPA provides several antifraud and ethics resources at www.aicpa.org Return to Previous Page |
|
||||||||
|
||||||||||
|
|
||||||||||
|
||||||||||
Sponsored by: