The Best Way to Enhance the Credibility of the Financial Statements Is by Means of the External Audit
Audit Framework 2011/12
Coursework
Student name: Hoai Phuong Le
ID number: U0870879
Pathway: BA Accountancy – Final Year
Word count: 2490 The purpose of a statutory audit is defined in law. Its function is to report to the shareholders, on whether the financial statements show a true and fair view, have been properly prepared in accordance with the Companies Act and the applicable financial reporting framework (Shah, 2009, pp72-73). It is believed that the financial statements which have been scrutinised by a highly qualified and independent professional should become more reliable. However, there has been a lot of debate about how much reliance can be placed on the auditor’s report and how much credibility it actually adds to the financial statements. This essay will discuss the content of an audit report with regards to its structure and main wordings to evaluate if an auditor’s report has successfully communicated to stakeholders that the financial statement of a limited company are credible. First of all, the purpose of an external audit is to ensure that a company’s internal controls, operating, guidelines and policies are adequate, effective and in compliance with govermental requirements, accounting standards and company policies. The audit process makes sure that reporting machanisms prevent errors and fraud in financial statement and also provides full assurance to investor and financial market participants of the truth and fairness of a company’s accounting records. Auditor plays an important role in improving confidence in the integrity of an organisation’s process and procedure relating to internal control and financial reporting.
The wording of an audit report has been carefully determined by accounting profession to communicate precisely what an adit does and does not do. A standard audit report is usually headed by the words ‘the independent auditor’s report’. The emphasis should be on the word
Coursework
Student name: Hoai Phuong Le
ID number: U0870879
Pathway: BA Accountancy – Final Year
Word count: 2490 The purpose of a statutory audit is defined in law. Its function is to report to the shareholders, on whether the financial statements show a true and fair view, have been properly prepared in accordance with the Companies Act and the applicable financial reporting framework (Shah, 2009, pp72-73). It is believed that the financial statements which have been scrutinised by a highly qualified and independent professional should become more reliable. However, there has been a lot of debate about how much reliance can be placed on the auditor’s report and how much credibility it actually adds to the financial statements. This essay will discuss the content of an audit report with regards to its structure and main wordings to evaluate if an auditor’s report has successfully communicated to stakeholders that the financial statement of a limited company are credible. First of all, the purpose of an external audit is to ensure that a company’s internal controls, operating, guidelines and policies are adequate, effective and in compliance with govermental requirements, accounting standards and company policies. The audit process makes sure that reporting machanisms prevent errors and fraud in financial statement and also provides full assurance to investor and financial market participants of the truth and fairness of a company’s accounting records. Auditor plays an important role in improving confidence in the integrity of an organisation’s process and procedure relating to internal control and financial reporting.
The wording of an audit report has been carefully determined by accounting profession to communicate precisely what an adit does and does not do. A standard audit report is usually headed by the words ‘the independent auditor’s report’. The emphasis should be on the word
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