How Does a Certified Public Accountant- CPA Perform an Audit?
A CPA is the most highly sought after and versatile accountant who has met a minimum educational requirement along with professional experience. He or she abides by the code of ethics after clearing his four-part examination. Further, CPAs perform an audit for business welfare.
What a CPA Does Which the Other Accountants Cannot Do?
Accounting contains various subjects which can be handled by an accountant such as taxes, auditing, accounting, consulting for business, corporates, start-ups but there are two important things which a CPA does that cannot be done by an accountant:
- A CPA performs an audit and prepares audited financial reports and filing a report with the SEC (Securities and Exchange Commission). It is mandatory for all the existing business to file their audited financial statements with SEC.
- A CPA is eligible to represent in front of the Internal Revenue Service.
An audit is a financial statement drafted by a company but the report drafted by a CPA is of the highest level. The CPA perform an audit and give the users opinion about their financial frameworks. A CPA makes a financial statement in accordance with the proper financial reporting framework. An audit report can be submitted to the lenders, investors, suppliers in order to gain their confidence for business purposes.
An audit is the written proof that the company is free from material misstatements and if these misstatements are errors or frauds.
A CPA passes the above statement by testing, comparing and tracing the items. As a result of gathering sufficient evidence, he may now issue his opinion about the material misstatements.
While undergoing the assessment of complete business operations, a CPA becomes aware of all the internal weakness and can suggest for improvement. He assesses the fraud risk.
What Does an Auditor do?
While auditing is a lengthy process which must be carried by professionals, this is to ensure precision in reporting the financial statement of the businesses. A CPA perform an audit through the following steps:
- Gaining complete knowledge of the business operations by interacting with management and others
- Understanding the internal control system and evaluating the same.
- Performing analytical performances as noted in account balances for both expected and unexpected variances
- Testing the supporting documents for balances and transactions
- Checking the inventory count physically
- Confirming the receivable accounts with a third party
Key Aspects of an Audit
The key aspects of an audit are as follows:
- Audit reports are visible to the creditors, investors and other parties for the development of trust in making business deals.
- A CPA presents a report which expresses that the financial statement is fair in all the aspects
- Audit reports are particularly necessary while involving outside investors, high financing or selling the business.
- It is an assurance that the financial statements are completely free of any material misstatements.
The following are obligatory for a CPA when performing an audit:
- Shall be independent
- Obtain a complete understanding of the internal risk and assess fraud risk
- Perform analytical procedures
- Perform verification procedures.
Typically, the CPA performs an audit which is entirely different and of the highest level thus providing accuracy along with a suggestion for the scope of improvement in the business operations, financial statements.