The auditing practices board (APB), which is the
body responsible for issuing auditing standards and guidelines, states:
The objective
of an audit of financial statements is to enable the auditor to express an
opinion whether the financial statements are prepared, in all material
respects, in accordance with an applicable financial reporting framework. The
phrases used to express an auditor’s opinion are ‘give a true and fair view’ or
‘present fairly in all material respects’ which are equivalent terms.
of an audit of financial statements is to enable the auditor to express an
opinion whether the financial statements are prepared, in all material
respects, in accordance with an applicable financial reporting framework. The
phrases used to express an auditor’s opinion are ‘give a true and fair view’ or
‘present fairly in all material respects’ which are equivalent terms.
The
‘application financial reporting framework’ comprises those requirements of
accounting standards, law and regulations applicable to the entity to determine
the form and content of its financial statements.
‘application financial reporting framework’ comprises those requirements of
accounting standards, law and regulations applicable to the entity to determine
the form and content of its financial statements.
In the UK the financial reporting framework is the
companies act 2006 together with all the associated accounting standards et.
Which comprise UK generally accepted accounting principles (UK GAAP).
companies act 2006 together with all the associated accounting standards et.
Which comprise UK generally accepted accounting principles (UK GAAP).
‘Entity’ is a general term embracing all types of
business, enterprise or undertaking including companies, charities, local
authorities, government agencies etc. some are profit oriented and some are
not.
business, enterprise or undertaking including companies, charities, local
authorities, government agencies etc. some are profit oriented and some are
not.
‘Present fairly’ instead of ‘true and fair’ applies
mainly to local authorities. A particular point is made of the fact that
responsibility for the preparation of the financial statements and the
presentation of the information included therein rests with the management of the
enterprise (in the case of a company, the directors). The auditor’s
responsibility is to report on the financial statements as presented by
management. We will come back to this key principle later.
mainly to local authorities. A particular point is made of the fact that
responsibility for the preparation of the financial statements and the
presentation of the information included therein rests with the management of the
enterprise (in the case of a company, the directors). The auditor’s
responsibility is to report on the financial statements as presented by
management. We will come back to this key principle later.
The auditors should be an independent firm
appointed to investigate the organization, its records, and the financial
statements prepared from them. The role of the organization, its records, and
the financial statements prepared from them. The role of the auditors is to
gather sufficient evidence so as to be able to form an opinion on the accuracy
and correctness of the financial statements. The primary aim of an audit is to
enable the auditors to say ‘these accounts show a true and fair view’ or, of
course, to say that they do not.
appointed to investigate the organization, its records, and the financial
statements prepared from them. The role of the organization, its records, and
the financial statements prepared from them. The role of the auditors is to
gather sufficient evidence so as to be able to form an opinion on the accuracy
and correctness of the financial statements. The primary aim of an audit is to
enable the auditors to say ‘these accounts show a true and fair view’ or, of
course, to say that they do not.
The objectives of an audit are:
Primary
To produce a rest report by auditors of their
opinion of the truth and fairness of financial statements so that any person
reading and using them can have belief in them.
opinion of the truth and fairness of financial statements so that any person
reading and using them can have belief in them.
Secondary
·
To advise
management of any defects or problems with their accounting systems and to
suggest ways of improving it.
To advise
management of any defects or problems with their accounting systems and to
suggest ways of improving it.
·
To detect
errors and fraud.
To detect
errors and fraud.
·
To
prevent errors and fraud by the deterrent and moral effect of the audit.
To
prevent errors and fraud by the deterrent and moral effect of the audit.
In addition to carrying out the audit auditors are
able to assist their clients with accounting problems, accounting and financial
reporting systems, taxation, financial risk management and problems.
able to assist their clients with accounting problems, accounting and financial
reporting systems, taxation, financial risk management and problems.