Federal securities laws also require that public companies have the financial statements they prepare audited by an independent public accountant. The independent public accountant’s audit is critical to the financial reporting process because the audit subjects companies’ financial statements to scrutiny on behalf of shareholders and creditors to whom company management is accountable. The auditor is the independent link between management and those who rely on the financial statements. The statutory independent audit requirement, in effect, grants a franchise to the nation’s public accountants, as an audit opinion on a public company’s financial statements must be secured before an issuer.
