Independent Auditor


DEFINITION of 'Independent Auditor'

A certified public accountant who examines the financial records and business transactions of a company that he/she is not affiliated with. An independent auditor is typically used to avoid conflicts of interest and to ensure the integrity of the auditing process. When an audit is performed, it is the financial auditor's job to make sure that records are examined in an honest and forthright manner. Independent auditors are sometimes called external auditors.

BREAKING DOWN 'Independent Auditor'

Independent auditors are often used - or even mandated - to protect shareholders and potential investors from the occasional fraudulent or unrepresentative financial claims made by public companies. The role of the independent auditor became especially relevant following the implosion of the dotcom bubble and the passage of the Sarbanes-Oxley Act (SOX) in 2002. The SOX enacted strict reforms, including the appointment of independent auditors, to improve the accounting and auditing procedures of public companies.

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  1. What are the differences between a 10-K report and a firm's own annual report?

    Publicly traded companies in the United States are required to file a host of documents, and two of the most important, for ... Read Full Answer >>
  2. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  3. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  4. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  5. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  6. How do dividends affect the balance sheet?

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