Purpose of audit of financial statements

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Sindhura G S asked 5 months ago

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered 4 months ago

**PURPOSE OF AUDIT OF FINANCIAL STATEMENTS** The objective of external audit is for the auditor to express an opinion on the truth and fairness of financial statements. The main necessity for conducting the audit of financial statements stems from the fact that the persons responsible for the preparation of financial statements are often different from the owners of large corporations. Whereas in small owner managed companies, the owners have first hand knowledge of the affairs of their business, management and ownership is normally separate in the case of large companies that often have thousands of shareholders. In large corporations, shareholders appoint directors to run the enterprise on their behalf. This separation of ownership and control creates the need for external audit. Financial statements are the main source of accountability of management performance by the shareholders. However, as the management is responsible for the preparation of financial statements, shareholders have to rely on external verification by auditors in order to gain reasonable assurance that the accounts are free from material misstatements and can therefore be relied upon to be presenting true and fair view of the affairs of the company. Thanks

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Mayank Kumar Gupta answered 5 months ago

An audit is conducted to provide an opinion whether "financial statements" (or the information being verified) are stated in accordance with specified criteria. Normally, the criteria are international accounting standard ( indas and SAs).

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Open uri20170510 32134 1uwcnoc?1494421631 Shubhangi Jain answered 5 months ago

The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

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