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 Omnibus
Had no real purpose till it got to us.
Never believe it.”
—Robert Frost (1874–1963)
“In using the strong hand, as now compelled to do, the government has a difficult duty to perform. At the very best, it will by turns do both too little and too much. It can properly have no motive of revenge, no purpose to punish merely for punishment’s sake. While we must, by all available means, prevent the overthrow of the government, we should avoid planting and cultivating too many thorns in the bosom of society.”
—Abraham Lincoln (1809–1865)
“But this fully answered John’s purpose toward Betty, for as she did not understand, she highly admired him; and he concluded by again repeating that learning was a fine thing for a man but ‘twas both useless and blameworthy for a woman either to write or read.”
—Sarah Fielding (1710–1768)