Anthony Miranda, president of Protocol Telecommunications, made an unusual decision four years ago when he hired an outside accountant to perform regular audits on his company, a telecommunications-equipment and -services provider in Van Nuys, Calif.

Whereas most entrepreneurs don't call in the auditors until they feel pressure from their bankers (or plan to go public), Miranda opted to do so early on, without prompting. "I wanted there to be no question then -- or at any time -- that our financial information was misstated or less than fully disclosed."

Protocol's audit arrangement works like this: An outside accountant, who is paid a monthly retainer of $1,000, audits the company's annual financial statements according to generally accepted accounting principles (which include verification of the accuracy of inventory, accounts receivable, and so on). The auditor also supervises the preparation of the company's quarterly reports by Protocol's controller.

When the arrangement began, Protocol, which had 25 outside investors, was logging $475,000 in annual sales; today its revenues are more than $1 million -- an expansion Miranda attributes in part to the reliability of the audited statements. "Our bankers were impressed by our decision to upgrade our financial reports without any requirements from them," he recalls. "That has helped us expand our credit line as necessary."

With 10 years of solid growth behind his company, Miranda now anticipates a public offering. "We've been building a credible record for years now," he says.