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In: Accounting

What is the reason and why an independent auditor reports on financial statements and internal control

What is the reason and why an independent auditor reports on financial statements and internal control

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Expert Solution

Auditing is an independent examination of financial results of an organisation, whether profit oriented or not, irrespective of its legal form or size, to enable the auditor to express an opinion on the financial statements. The auditor examine the financial statements and ascertain that the financial statements are prepared in all material respect in accordance with the applicable financial reporting framework. During this examination the auditor find out sufficient appreciate evidences to reach a conclusion and based on that conclusion, the auditor express his opinion on the financial statements. This opinion on the financial statements by an expert auditor , increases the realiabilty of the financial statements. All the stakeholders are interested to know the verified financial position and performance of the for making their valuable decisions.

It is the responsibility of the management that to prevent the misstatement in the financial statements either due to fraud or error. Inorder to prevent these fraud and errors, there need an efficient and effective internal control system. If an adequate internal control system is in place and it is working effectively, then the chance of fraud or error is very less.In the absence of internal control system, the chances of fraud are very high and these fraudulent activities sometimes may not be detected in the audit also. In such situation it will affect the decisions of stakeholders. So it is required to report that adequate internal controls are in place and they are working effectively.

ekkarill92 answered 2 years ago
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