What Is An Audit
What Is An Audit
The phrases used; to express the auditors opinion means that the
financial statements give a true and fair view or have been presented fairly
in all material respects.
True and fair presentation means that the financial statement are prepared
and presented in accordance with the requirements of the applicable
International Financial Reporting Standards (IFRS) and local
pronouncements/legislations.
What we can understand as the essential features of an audit from the
above definition and explanation are as under:
The end result of an audit is an opinion to assist the user of the financial
statements. Auditing
therefore relies heavily on professional judgment, not merely on the facts.
In order to make the user of the auditors report able to feel confident in
relying on such report, the
auditor should be independent of the entity. Independent essentially means
that the auditor has no
significant personal interest in the entity. This allows an objective,
professional view to be taken.
You will note that this is a wide concept of an audit which can be applied to
any entity, not just to limited companies. However, in this course, we are
concerned primarily with audits of limited companies (often known as
statutory or external audits). Any other audit applications will be clearly
indicated for you in the text.
Audits are of two types namely optional or private audits and statutory or
compulsory audits. Basis for this classification is legal requirements with regard
to conduction of audit.
Examples for private audits are audit of sole trading concerns, audit of
partnership firm, etc., company audit can be taken as example for compulsory
audits.