Independent Auditor

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Certified Information Systems Auditor ...

    A certification available for professionals who conduct audits ...
  2. Checks And Balances

    The various procedures set in place to reduce mistakes or improper ...
  3. Auditor

    An official whose job it is to carefully check the accuracy of ...
  4. Accountant

    A professional person who performs accounting functions such ...
  5. Annual Report

    1. An annual publication that public corporations must provide ...
  6. Auditor's Opinion

    A certification that accompanies financial statements and is ...
RELATED FAQS
  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. How is accounting in the United States different from international accounting?

    Despite major efforts by the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, ... Read Full Answer >>
  3. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  4. What is backtesting in Value at Risk (VaR)?

    The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >>
  5. How are transfer prices set?

    The United States, like most nations, does not want to allow transfer pricing methods that reduce the amount of taxes the ... Read Full Answer >>
  6. How do I discount Free Cash Flow to the Firm (FCFF)?

    Discounted free cash flow for the firm (FCFF) should be equal to all of the cash inflows and outflows, adjusted to present ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Accounting Rules Could Roil The Markets

    FAS 142 is an accounting rule that changes the way companies treat goodwill. Be aware of the impact it has on reported earnings to avoid making bad investment decisions.
  2. Fundamental Analysis

    The One-Time Expense Warning

    These income statement red flags may not spell a company's downfall. Learn why here.
  3. Personal Finance

    A Look At Accounting Careers

    More than just crunching numbers, this career blends detective work with trouble shooting.
  4. Professionals

    Examining A Career As An Auditor

    Stricter government regulations have put auditing professionals in demand.
  5. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  6. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  7. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  8. Economics

    How to Calculate Trailing 12 Months Income

    Trailing 12 months refers to the most recently completed one-year period of a company’s financial performance.
  9. Economics

    What is Unearned Revenue?

    Unearned revenue can be thought of as a "pre-payment" for goods or services which a person or company is expected to produce to the purchaser.
  10. Economics

    What is a Capital Lease?

    A lease considered to have the economic characteristics of asset ownership.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center