Purpose of CPA Audit Review

Certified Public Accounting (CPA) firms offer audit services to companies as an external authority that validates the company's financial information. Audits test financial information against Generally Accepted Accounting Principles (GAAP), ensuring all applicable accounting standards are followed.

History

The American Institute for Certified Public Accountants (AICPA) has provided audit guidance for CPA firms since 1936, according to their website. The Sarbanes-Oxley Act of 2002 has increased the intensity and frequency of CPA audits for public companies.

Facts

A professional, external CPA audit tests several different samplings of financial information. These tests ensure that all financial transactions are accurate, relevant, and valid to the company's financial statements.

Function

Audited financial statements allow companies to seek outside investment for financing new or expanded business operations. Lenders or private investors believe that audit approvals from CPA firms provide fewer risks when lending money.

Types

While most audits are related to financial information, CPA firms may conduct operational, procedural, or internal audits. Each audit is a testament that companies follow the business rules and regulations in their industry.

Warnings

Audits can flag a company's financial information or business procedures as inadequate, causing companies to admit mistakes in their operations. Because these flags are detrimental to the company, they must correct these items and seek a remedial audit to certify the corrections.

References

• All Business: Audit Definition

Resources

• The American Institute of Certified Public Accountants
• The American Institute of Certified Public Accountants: Center for Audit Quality