The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. The objective of an audit of financial statements is to enable an auditor to express an opinion as to whether the financial statements are prepared, in all material respects, in accordance with International Financial Reporting Standards or another identified financial reporting framework. The auditor's opinion is expressed in by using the phrase 'give a true and fair view' or 'present fairly, in all material respects'. The auditor and the client's management have separate and distinct responsibilities. The auditor is responsible for forming and expressing an opinion on the financial statements. The client's management, on the other hand, bears responsibility for preparing and presenting the financial statements. Management's responsibilities are not relieved by the fact that the statements are audited. An auditor must comply with the general principles of an audit. These require an auditor to 1) comply with the 'Code of Ethics for Professional Accountants' issued by the IFAC (or a national Code of Ethics, where appropriate); 2) conduct an audit in accordance with International Standards on Auditing (ISAs) (where applicable), and 3) plan and perform the audit with an attitude of professional skepticism, recognizing that circumstances may exist that cause the financial statements to be materially misstated.

At the end of this section, students should be able to meet the following objectives:

Define “internal control.”
Explain a company’s need for internal control policies and procedures.
Describe the effect that a company’s internal control has on the work of the independent auditor.

At the end of this section, students should be able to meet the following objectives:

Describe the goal of an auditor in examining an account balance.
List audit tests that might be performed on an account receivable total.
Understand the reason that an independent auditor only provides reasonable assurance and not absolute assurance.

At the end of this section, students should be able to meet the following objectives:

Describe the purpose of the independent auditor’s report.
Identify the intended beneficiaries of an independent auditor’s report.
Discuss the contents of the introductory, scope, and opinion paragraphs in an independent auditor’s report.
List problems that might impact the contents of an independent auditor’s report.
Indicate the method used by decision-makers to determine whether an independent auditor has been unable to issue an unqualified opinion.

At the end of this section, students should be able to meet the following objectives:

Understand the purpose of an independent audit.
List the two primary components of an independent audit.
Explain the function of an independent audit firm.
Describe the steps required to become a Certified Public Accountant (CPA).
List the various services provided by many public accounting firms. 6. Discuss the necessity for the creation of the Public Company Accounting Oversight Board (PCAOB) and describe its function.

End-of-Chapter Exercises
Short answer questions
True or False
Multiple choice
Problems
Research