A public accounting firm is an organization that offers auditing and other related services to its clients. Clients can include individuals, private companies, and public companies, among others. Public accounting firms are typically required to audit publicly traded companies due to the Securities Exchange Act of 1934 and related rules and regulations.
In order to perform their audit work in accordance with these laws, public accounting firms must be audited themselves in order to maintain their own accreditation status.
Who is the PCAOB?
The Public Company Accounting Oversight Board, or PCAOB, is an independent, non-governmental body created to oversee and audit auditors who work with public companies. The board has broad regulatory powers over auditors working with publicly traded companies; it’s also charged with ensuring auditor independence.
This means that any misconduct by auditors may be investigated by the PCAOB but investigations are only conducted at a company’s request. For example, if a corporation thinks its auditor might be engaging in fraudulent behavior, it can request an investigation from the PCAOB. Fines for misconduct can range from $10 million to $2 million depending on circumstances.
How to choose an auditor
Don’t just go with your gut some of the best auditors are ones you may not have heard of. Ask a few people around town who they use, and check out their credentials. Don’t make any assumptions about what the best is until you learn more.
Once you choose an auditor, make sure they also practice external audit procedures to ensure unbiased opinions; many businesses choose accountants that work internally, but there are definite disadvantages to working with someone whose firm is performing services for you all year long.
In addition to choosing an auditor that fits your needs, keep in mind how costs will factor into your decision don’t be afraid to ask potential candidates how much they charge and consider whether their fees fit within your budget.
How often should you get audited?
Generally, publicly traded companies are audited once a year, and privately held companies are required to be audited every other year. However, if your company undergoes a big event such as a merger or acquisition or goes through financial distress that might indicate fraud, you may get an audit more frequently.
It’s also important to note that there is no standard frequency for being audited by state agencies. Each agency determines its own policies and may conduct annual, biannual or even quarterly audits of your company’s records. Many states use federal criteria to determine when they need to step in and conduct an audit, so it’s worth checking with both federal and state authorities before establishing your own internal policies.
What are the benefits of being audited?
Audits are often thought of as a nuisance, but they have many benefits. For one, your business will have increased confidence and peace of mind knowing that someone else is checking up on your business activities. Second, for businesses that accept payments from customers being audited by a third party may make you more trustworthy to customers, who know there’s an independent body double checking things behind the scenes.
Finally, audits give potential investors more comfort and confidence in investing in your company if you ever seek funding. It’s also important to note that government agencies regularly audit public companies and require them to produce certain documentation—being audited isn’t just something small businesses do!
Should your company be audited if it doesn’t meet industry standards?
If you don’t see industry or government standards, it might not be mandatory to hire an auditor. However, certain companies that aren’t meeting industry standards need a special kind of audit called a special examination.
Certain industries, like banks and brokerages are more likely to be audited because they hold sensitive financial data. If your company is in one of these areas, it might be worth hiring an auditor for security reasons alone even if you don’t meet any other requirements for being audited.
Conclusion
With regulators keeping close tabs on auditors in recent years, it’s easy to see why companies with business dealings across borders would turn to Big Four. At Baker Tilly, we understand the importance of reliable and thorough audits of financial statements and company operations. We pride ourselves on being a top-notch audit firm capable of serving multinational corporations around the world.
Our network is comprised of more than 24,000 professionals operating out of almost 400 offices throughout over 120 countries worldwide. If you need an audit in Asia or Europe, don’t hesitate to contact us! Our approach will quickly allow you to access a variety of industry experts who can provide you with a comprehensive understanding of your financial situation.
