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Financial Statements Audit simply means the examination, inspection, or review of an entity’s financial statements. The process of financial statement audit also analyzes the disclosures by an independent auditor in the financial statements. The purpose of conducting a financial statement audit is to ascertain the fairness of the financial statements and related disclosures. The phrases “give a true and fair view” and “present fairly” is usually used to describe the purpose of financial statement audit. Financial Statements Audit also shows whether the financial statements are prepared as per the financial reporting framework.
A financial statement audit adds credibility to the financial statements and shows the financial position and performance of a business. Audited financial statements enhance the confidence of the interested parties or the intended users. For e.g; all Public companies are required to file their audited financial reports with the Securities and Exchange Commission, all lenders are interested in the audited financial statements of a company to which they lend funds, suppliers are interested in the audited financial statements of a company to know if they can extend trade credit.
Table of Contents
Financial Audit phrases can broadly be categorized into:
The basic principles of auditing are integrity, objectivity, independence, confidentiality, skills and competence, work performed by others, documentation, planning, audit evidence, accounting system & internal control & audit reporting. They are the basics of auditing that govern the professional responsibilities of an auditor and have been discussed in detail below:
The evaluation of a company’s financial performance is done based on the financial statements. Financial statements communicate the overall doing of a company over a specific period against its competitors as well as against the company’s past performance. It also facilitates future decision-making. Therefore, it is important to conduct a financial statement audit. A financial statement audit enhances the credibility of the financial statement and helps in gaining the confidence of the intended users.
Also Read: What is Financial Statement Analysis?
Ankita is an Advocate and has joined Enterslice as a Legal Researcher. Her work focuses on General Civil and Commercial laws, Corporate Taxation Laws, Labour and Employment Laws and Dispute Resolution. She is a law graduate from School of Law, University of Petroleum and Energy Studies. Prior to joining Enterslice, Ankita has the experience of practicing law in Delhi and Odisha.
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