When you have a business, you may find yourself in need of an independent auditor. This CPA will come in and go over your accounting and give you and your business a report, this is usually a part of the financial statement of your business. If the company is publicly owned it is more likely that you will use one of the independent auditor firms to have the reports done as this helps lend credibility to your financial reports.
Your auditor will also ensure that the accounting system that you are using is one that is allowed by GAAP (generally accepted accounting principles). If everything is good and in place the financial report will show this and your company will look good. However if the auditor flag your companies financial records that means that there may be some potentially harmful trouble brewing and may indicate that this company's ability to run effectively is in doubt. These problems may be that there is low cash balances, it may show a lot of unpaid or overdue liabilities or even that the company is in the middle of lawsuits which they may not have the money to cover.
The auditor will be unbiased and skeptical, they should be ready to challenge whether the company has a good or bad systme and they should also adhere to the accounting standards that are not misleading. They should ensure that the reports are presented in a fair manner, and they must be tough with the customer to ensure that they don't make mistakes that could cost their company in the long run.
Lastly they should be able to blow the lid off a company that is engaging in fraudulent and deceptive behaviors. They will also want to be very particular because in some court cases the company is engaging in some kind of fraud and the auditors are missing this fraudulent behavior, as seen by the Enron case.
The Independent auditor serves an interesting purpose, he gives a report that tells about the financial stability of the company, and give it credibility. However they are also very critical and will point out potential problems that your company's accounting system is having and how to fix them before the company goes under.
