Question

1 - What is the objective of an audit? For whom is an audit of a publicly-traded company primarily conducted? Who else might use the audit report of a publicly-traded company? Explain.

2 - What is an audit trail? Why might an auditor need to alter audit procedures in the audit trail is computerized?

Can you answer these two question

Answer 1

1.

a)    Audit is a term derived from the Latin word "audire" which means to hear. It begins where accountancy ends. Audit is the examination of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions.

OBJECTIVE OF AN AUDIT

PRIMARY OBJECTIVE:

The primary object of auditing is to conduct an independent review on financial statements and express an opinion about their reliability in representing the company's financial position and working results. The prime audit is to form an independent judgement and opinion about the reliability of accounts and truth and fairness of financial statements of affairs and working results. An auditor check whether the facts are represented in the balancesheet and Profit & Loss account are true. Based on the checking, the auditor express his opinion about the quality of the financial statements, that the truth and fairness of financial position and operating results of the enterprises as disclosed in the financial statements. The main mission of auditing is to review the reliability of statements and not fault finding.

SECONDARY OBJECTIVE:

The detention of errors and frauds is the secondary objective of auditing. The detention as well as prevention of fraud is much important in the process of auditing.

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b) An audit of publicly-traded company is primarily conducted for the share holders of the company. Shareholders and the board of directors use the audit report to asses the integrity of management and transparency of financial statements.

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c) The users of audit reports of publicly-traded companys other than shareholders are :

1. Government :

The government uses the audit reports and audited financial statements to asses the completeness and accuracy of the tax declaration.

2. Investors :

They use audit reports and audited financial statements to asses the company's financial performance and financial position for their investment opportunity.

3. Creditors and Banks:

The creditors and Banks need audit reports and audited financial statements to know about the company's ability to pay back the loans before lending to them.

  

Please ask questions one by one. I have given answers to the first questions as per the guidelines