The primary objective of an audit of financial statements is to let auditors work independently and objectively to review the financial statements and express their opinion based on the result of evidence obtained. The audit opinion and audit report are really mean to the users of financial statements.
The users of financial statements might use the financial information and data of entity with other non-financial information and data to make their economic decision.
That means correctness of decision will also be depending on the correctness information that discloses by the entity.
Auditor proves whether or not the entity’s financial information is truly and correctly prepare and present through their opinion. Check the four types of audit opinions here.
How to meet this objective?
There are many factors that could help audit to meet the main objective of audit on financial statements as well as limit them from meeting the objective.
- Employ the right audit strategy:
Employing the right audit strategy is one of the most important factors that could help audit meet their objective with less effort.
For example, having enough audit resources with deep knowledge in the client’s industry to help to strategically assess the potential risks that might contain in the financial statements. Risks based approach is also part of the audit strategy that could help the auditor to meet the objective with fewer works.
- Employ the right audit plan:
The audit plan is also the most vital factor that needs to be seriously monitored by the audit partner so that the main objective will not miss. For example, the auditor has the proper assess the risks associate with the client before engagement accept,
It is the requirement of law or authority that auditors need to be independent of their auditor clients. This is to make sure that the auditor’s judgment is not influenced by self-interest. Independence here includes both audit firms as well as an audit team.
Audit work and judgment need to be objectively performed and always follow the framework, standard, law, and policy that already set.
- Conflict of interest:
Conflict of interest could be one of the most important issues that limit auditor from reaching its objective. Certain policy and procedure could help the auditor to minimize the conflict of interest and in case of auditor face the conflict of interest, then they should follow the guideline that set by international standard on auditing.
- Audit Fee:
Most of the audit firms want better pay for their work and this could be the factor that leads to bias on the audit judgment. The auditor should be making sure that the fee that charges to the client is based on the works that they perform. In addition, the auditor should also avoid low-balling audit fees.
- Management’s Integrity:
No matter how the detective audit procedure is or how well the audit strategy is, the risks of material misstatements still high if the entity’s management does have a high sense of integrity. To minimize this, the auditor should make sure that the client’s due diligent could detect this issue.