Financial accounts audit
The primary objective of financial accounts audit is to check accuracy of the financial statements. Enhance confidence that the information being relayed by the statements is free from material misstatement and can be relied upon for decision making
Material misstatement refers to errors in the financial statements that if it was corrected would lead to a different financial decision by the user of such financial statements. It is an error that that would change conclusions of the financial statements users like shareholders, creditors, banks or other stakeholders relying on such information.
After auditing the financial statements an auditor issues an opinion of his findings. The opinion gives verdict on where the financial statements are presented fairly in all material respect and they give a true and fair view on the performance of the business.
The financial statements are prepared by the management and therefore the auditor has no responsibility on their preparation. Most of the times the directors or managers do not prepare the financial statements literally, but they delegate to people with the right competence to do it.
It is the responsibility of the directors to set proper internal controls with which the business is run to ensure risks are minimized.
The responsibility of the auditor is to obtain a reasonable assurance on whether the statement are free from material misstatement.
Financial accounts audit is often carried out by external auditors.