Audit of financial statements is to check the accuracy of accounting principles used
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#1. Audit of financial statements is to check the accuracy of accounting principles used, examine the overall financial presentation. It is used to confirm that they are in accordance with all guidelines and regulations.
The goal of auditing internal controls is to reduce the risk of missing important information and make corrections if needed to enhance the effect of operation controls. This is to avoid misstatements which can occur and cause errors that can lead to fraud.
Audits are normally performed by an independent auditor. An independent auditor is a person from an outside company who checks the fairness of company’s account. Making sure that they are within the guidelines and the numbers check out.
Internal audits are conducted three to four times a year depending on the requirement of that specific company and the size of the company. An external audit is generally conducted at the end of the year or fiscal period for the year.
When I worked at Dollar General a few years back, we had ours yearly, but it was at the year mark of the opening of our store, which normally fell in the middle of the year.
#2. The Purpose of an Audit
The purpose of an audit is for an independent third party to examine the financial statements of an entity. This examination is an objective evaluation of the statements, which results in an audit opinion regarding whether the statements have been presented fairly and in accordance with the applicable financial reporting framework (such as GAAP or IFRS). This opinion greatly enhances the credibility of the financial statements with users, such as lenders, creditors, and investors. Based on this opinion, users of the financial statements are more likely to provide credit and funding to a business, possibly resulting in a reduced cost of capital for the entity.
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