Purpose
Financial audits exist to add credibility to the implied assertion by an organization's management that its financial statements fairly represent the organization's position and performance to the firm's stakeholders. The principal stakeholders of a company are typically its shareholders, but other parties such as tax authorities, banks, regulators, suppliers, customers and employees may also have an interest in knowing that the financial statements are presented fairly, in all material aspects. An audit is not designed to provide assurance of 100% accuracy; rather it is designed to increase the possibility that a material misstatement is detected by audit procedures. A misstatement is defined as false or missing information, whether caused by fraud (including deliberate misstatement) or error. "Material" is very broadly defined as being large enough or important enough to cause stakeholders to alter their decisions. Audits exist because they add value through easing the cost of information asymmetry and reducing information risk, not because they are required by law (note: audits are obligatory in many EU-member states and in many jurisdictions are obligatory for companies listed on public stock exchanges).
Read more about this topic: Financial Audit
Famous quotes containing the word purpose:
“I don’t think life is absurd. I think we are all here for a huge purpose. I think we shrink from the immensity of the purpose we are here for.”
—Norman Mailer (b. 1923)
“There are a sort of men whose visages
Do cream and mantle like a standing pond,
And do a willful stillness entertain,
With purpose to be dressed in an opinion
Of wisdom, gravity, profound conceit,
As who should say, “I am Sir Oracle,
And when I ope my lips let no dog bark!””
—William Shakespeare (1564–1616)
“Nowadays, if New York has a heart, it might be the Garden. Almost everyone goes there, for one purpose or another. There are dog shows, and Sonja Henie and mass meetings.”
—In New York City, U.S. public relief program (1935-1943)