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:
“...Often the accurate answer to a usage question begins, “It depends.” And what it depends on most often is where you are, who you are, who your listeners or readers are, and what your purpose in speaking or writing is.”
—Kenneth G. Wilson (b. 1923)
“Possibly the Creator did not make the world chiefly for the purpose of providing studies for gifted novelists; but if he had done so, we can scarcely imagine that He could have offered anything much better in the way of material ...”
—Elizabeth Stuart Phelps (1844–1911)
“In considering the policy to be adopted for suppressing the insurrection, I have been anxious and careful that the inevitable conflict for this purpose shall not degenerate into a violent and remorseless revolutionary struggle.”
—Abraham Lincoln (1809–1865)