Frequently Asked Questions
1. What is a financial statement audit?
A financial statement audit is an examination, on a test basis, of evidence supporting
the amounts and disclosures in a company's financial statements and that such amounts and disclosures are accounted for in accordance with a generally accepted set of standards.
2. What is the purpose of an independent financial statement audit?
To provide financial statement users with reasonable, but not absolute, assurance that the financial statements prepared by management are fairly presented. This assurance is provided in the form of a written opinion report signed by the Certified Public Accounting firm.
3. Who is allowed to conduct a financial statement audit?
An independent audit must be conducted by a Certified Public Accountant (CPA). The CPA may have accounting staff perform audit procedures but the staff must be fully qualified and must be closely supervised by the CPA. In addition, an independent audit of a publicly-held company, or a company about to go public must be conducted by a CPA in a firm that is registered with the U.S. Public Company Accounting Oversight Board (PCAOB).
4. Are all PCAOB registered firms the same?
Not all firms are the same. Some firms are full service firms that do a little of everything and only a small amount of public company auditing. Other firms are niche firms that specialize in public company auditing. There are also differences in the quality of the work product generated by the firms.
5. How can I determine the quality level of the firm I select?
There are several ways to learn about a firm's quality. The first method of course is to ask your other advisors about the firm's reputation. Another method is to ask the CPA firm for a copy of their peer review report. A third and more direct method is to view the PCAOB firm's inspection report. PCAOB registered firms are required to undergo a vigorous inspection at least once every three years. The PCAOB inspects a sample of audits the firm has worked on and also inspects the firm's quality control systems. The PCAOB then produces a final inspection report which is available to the public on the PCAOB website.
6. How long does it take to complete an audit?
The time to start and complete an audit will vary with the size of the company and the quality of its internal bookkeeping, accounting and record keeping. In general if a company's records are in good order, the audit process should take anywhere from three to six weeks.