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:
“The technologist was the final guise of the white missionary, industrialization the last gospel of a dying race and living standards a substitute for a purpose in living.”
—Max Frisch (1911–1991)
“Thus one can observe that those who proclaim piety as their goal and purpose usually turn into hypocrites.”
—Johann Wolfgang Von Goethe (1749–1832)
“Your good mother tells me you are feeling very badly in your new situation. Allow me to assure you it is a perfect certainty that you will, very soon, feel better—quite happy—if you only stick to the resolution you have taken to procure a military education. I am older than you, have felt badly myself, and know, what I tell you is true. Adhere to your purpose and you will soon feel as well as you ever did.”
—Abraham Lincoln (1809–1865)