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Introduction to Audit

What is Auditing?

External auditors help ensure that public company financial statements are accurate, so investors can rely on this information when making investment decisions. Auditors accomplish this by assessing a company’s financial controls and the information about the company’s financial performance contained within the financial statements.

Auditors report to a board-appointed audit committee as part of their strict independence standards. Since auditors are independent from public companies, auditing builds trust in those companies and the broader US markets. Americans depend on these markets to fund major life investments including mortgages, college tuitions, and retirement.

Because of their critical role in reliable financial reporting, auditors contribute significantly to the sustained, orderly operation of the nation’s capital markets. The auditing profession continuously strengthens audit quality to promote the reliability of financial reporting that benefits investors in the US capital markets. Learn more about how auditors strengthen capital markets.

Auditing Is Evolving to Meet the Needs of the Future

The audit profession is purpose-driven, providing value to the public by continually evolving to meet new needs. Auditors bring the independence, expertise, and experience necessary to enhance the reliability of traditional financial information. Auditors are able to do the same for environmental, social, and governance (ESG) reporting, non-GAAP financial measures and key performance indicators (KPIs), cyber risk management, and other relevant information not included in audited financial statements, which investors are increasingly using to make decisions.

Maintaining Audit Quality

Public company audit firms contribute to the reliability and quality of financial statements, thereby supporting the sustained, orderly operation of our capital markets. The multi-disciplinary model enhances audit quality by leveraging in-house expertise—such as forensic accounting, cybersecurity, data analytics, and valuation professionals. These subject-matter experts are available to support the audit engagement team in performing audit procedures.

The Role of the Auditor in Financial Statements 

Auditors independently assess financial statements issued by public companies to determine the fairness with which they present a company’s financial position, results of operations, and its cash flows. Auditors execute rigorous audits of annual financial statements and perform a high-level review of quarterly financial statements.

The Role of the Auditor in Internal Control Over Financial Reporting

During annual financial statement audits, auditors assess the internal controls and procedures that public companies follow to ensure compliance with financial reporting regulations. Auditors determine whether a flaw or weakness exists within the company’s control system that could leave it vulnerable to a fraud incident or an error in the company’s financial statements.

Learn more about the role of the auditor in today’s changing financial reporting environment here.

For some more information about the profession, take a look at these resources: