Financial Reporting and External Audit

Financial Reporting and External Audit

By
David F. Larcker, Brian Tayan
CGRI Quick Guide Series.
2015

The board of directors is responsible for ensuring the integrity of published financial statements. This includes working with management to set the parameters for accounting quality and internal controls, and retaining an external auditor to test financial statements for material misstatements.

This Quick Guide reviews the process by which the board carries out this function. It provides answers to the questions:

  • What does the audit committee do?
  • How does it oversee financial reporting?
  • How often do companies restate financials and why?
  • What does the external audit do?
  • Do auditors have agency problems?