If you had a large sum of money invested in
a company, wouldn't you feel better if there was someone outside
of management keeping an eye on things? This is the purpose
behind the auditor's report, which is sometimes called the
" Report of Independent Accountants." The job of the auditors
is to express an opinion on whether the financial statements
are reasonably accurate and provide adequate disclosure.
By law, every public company with stocks or bonds trading
on an exchange must have their annual reports audited by a
Chartered Accountant firm (or a Certified Public Accountant firm, for American companies). An auditor's report is meant
to scrutinize the company and identify anything that might
undermine the integrity of the financial statements.
The typical auditor's report is almost always broken into
three paragraphs and written in the following fashion:
| Independent
Auditor's Report |
| Paragraph
1 |
The first tells the
responsibilities of the auditor and directors in
general and lists the areas of the financial statements
that were audited. |
| Paragraph
2 |
This paragraph lists
how the GAAP (generally accepted accounting principles) were applied, and what areas of the
company were assessed. |
| Paragraph
3 |
The third paragraph
gives the auditor's opinion on the financial statements
of the company being audited. This is simply an
opinion, not a guarantee of accuracy. |
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