Public companies engage
independent or external auditors because external auditors lend credibility to
the audited financial reports. Public companies must comply with audited
financial statements for a given year or period to be submitted to different
regulatory agencies. Once the audit is done the external/independent auditor
will issue an opinion about the financial statements of the public company
whether it was fairly reported or not according to the accounting standards.
The auditor can also make a disclaimer when there is no opinion will be issued
because of limited scope of examination or supporting documents that would not
enable them to form an opinion. The external auditor must be independent in
fact and in appearance. This lends credibility to the financial reports and
gives a high level of assurance to the end users i.e. investors, government
agencies.
