Audits and Auditors 161
independence—the major attribute the auditor has to sell to the public. (The topic of ethics will be discussed in depth in chapter 12.) A typical auditor’s report (known as the unqualified report) is issued when the financial statements are in accordance with GAAP. This report is written and issued by the auditors and is submitted to the public with the financial statements.
Quick Tip Remember that the financial statements are prepared by and are the responsibility of the management of the company and not the auditors. Since the major corporate failures of the 1990s and early 2000s, the Sarbanes-Oxley Act of 2002 requires company management to sign a letter stating that the financial statements are presented fairly in accordance with Generally Accepted Accounting Principles, just as the auditors must.
Accounting Versus Auditing As discussed in previous chapters, accounting is the process of recording, classifying, and summarizing economic events in a process that leads to the preparation of financial statements. Auditing, on the other hand, is not concerned with the preparation of the accounting data, but with the evaluation of this data to determine if it is properly presented in accordance with the rules of accounting (GAAP) and whether it properly reflects the events that have occurred during the period in question.
Types of Auditors An auditor is an individual or company who checks the accuracy and fairness of the accounting records of a company and determines whether the financial statements are in accordance with the Generally Accepted Accounting Principles. There are many different types of auditors. The three most common types are described in the following section.