A financial statement audit is an independent appraisal of
the financial statements prepared by the organization. The cardinal objective
of a financial statement audit is to provide an independent assurance that the
management has, in its financial statements, presented a “true and fair” view
of a company’s financial performance. The result of this examination is a
report by the auditor, attesting to the fairness of presentation of the
financial statements and related disclosures. The auditor’s report must
accompany the financial statements when they are issued to the intended
recipients.
The purpose of a financial statement audit is to add
credibility to the reported financial position and performance of a business.
Similarly, lenders typically require an audit of the financial statements of
any entity to which they lend funds. Suppliers may also require audited
financial statements before they will be willing to extend trade credit (though
usually only when the amount of requested credit is substantial).
Audits have become increasingly common as the complexity of
the two primary accounting frameworks, Generally Accepted Accounting Principles
and International Financial Reporting Standards, have increased, and because
there have been an ongoing series of disclosures of fraudulent reporting by
major companies.
The primary stages of an audit are:
- Planning
and risk assessment. Involves gaining an understanding of the business
and the business environment in which it operates and using this
information to assess whether there may be risks that could impact the
financial statements.
- Internal
controls testing. Involves the assessment of the effectiveness of an
entity’s suite of controls, concentrating on such areas as proper
authorization, the safeguarding of assets, and the segregation of duties.
- Substantive
procedures. Involves a broad array of procedures, of which a small
sampling.
An audit is the most expensive of all the types of
examination of financial statements. The least expensive is a compilation,
followed by a review. Publicly held entities must have their quarterly
financial statements reviewed, in addition to the annual audit.
The manner of appointment, the qualifications and the format
of reporting by an external auditor is defined by statute which varies
according to jurisdiction of different countries. The auditors must be a member
of one of the recognized professional accountancy bodies. The auditors normally
address their reports to the shareholders of a corporation or to the owners of
the business entity. The auditors are subjected to strict rules to uphold their
integrity and to establish independence.
Dawgen Global is an integrated multidisciplinary professional service firm We are integrated as one firm and provide several professional services including: audit,accounting ,tax,IT,Risk, HR,Performance, M&A,corporate recovery and other advisory services Caribbean Head Office Dawgen Tower 47-49 Trinidad Terrace Kingston 5 Tel: (876) 9292518 | (876) 9265210 info@dawgen.global
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