Unit 7 Listen and Read:
Why an audit is performed
Auditors perform an audit so as to add credibility to management's inherent assertions included in the financial statements. If the audit is to have any value, the auditor's opinion as to the reliability of the assertions must be communicated to the users of the financial statements. The auditor 'communicates' the results of the audit through the audit report, a document, often just one page in length, that is attached to audited financial statements and that sets out the scope of the audit (i.e. the work the auditor has performed) together with the auditor's opinion on the reliability of the assertions inherent in the financial statements. Financial statement 'users' include such groups as shareholders, suppliers, customers, lenders, borrowers, potential investors, and regulatory authorities. That is, financial statements are reliable when they contain no material misstatements, which is, in effect, what management asserts when they prepare the financial statements. There are two categories of assertions by management that are of particular concern to auditors: internal control assertions and financial statement assertions.