What it is:
How it works (Example):
By law, companies in the U.S. are required to have their financial statements reviewed by an outside auditor to ensure that they truthfully reflect the company's financial status. This review conforms to what is known as the generally accepted accounting principles (GAAP). After having reviewed a company's financial statements, the auditor will issue an official auditor's report. This report reflects the auditor's opinion concerning the company's conformity to GAAP, in addition to the accuracy of its financial statements.