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What is an audit?

Author: T. K.
by T. K.
Posted: Mar 21, 2022

What is an audit?

An audit is a systematic and independent examination of financial statements and other records to assess the degree of compliance with specified criteria. The purpose of an audit is to express an opinion on the financial statements in accordance with generally accepted auditing standards. An audit also provides assurance that the financial statements are fairly presented.

The Financial Accounting Standards Board (FASB) is the designated organization in the United States that sets standards for financial accounting and reporting. The FASB issues Statements of Financial Accounting Standards (SFAS), which are authoritative guidance for financial statement preparation.

The Securities and Exchange Commission (SEC) is the governmental agency in the United States that regulates the securities industry. The SEC requires public companies to file periodic financial reports with the agency, including audited financial statements. The SEC also requires that companies disclose any significant changes in their financial condition in Form 10-Q, which is filed quarterly.

The Sarbanes-Oxley Act of 2002 (SOX) is a federal law that imposes additional requirements on public companies with respect to their financial reporting. The SOX requires, among other things, that public companies have an independent auditor review their financial statements and issue a report on the audit.

An auditor is an independent professional who is qualified to conduct an audit and who has been engaged by the company's board of directors to do so. The auditor's report is a formal document that states the auditor's opinion on the financial statements.

The auditor will examine the financial statements and related records to determine whether they are fairly presented in accordance with generally accepted accounting principles (GAAP). The auditor will also assess the effectiveness of the company's internal control over financial reporting.

The auditor's report will contain one of the following opinions:

  • Unqualified opinion: The financial statements are fairly presented in accordance with GAAP.
  • Qualified opinion: The financial statements are fairly presented in accordance with GAAP, except for a specified matter.
  • Adverse opinion: The financial statements are not fairly presented in accordance with GAAP.
  • Disclaimer of opinion: The auditor was unable to express an opinion on the financial statements.

The auditor's report should be addressed to the company's board of directors. It should state the auditor's opinion and explain the basis for that opinion. The report should also identify any significant deficiencies in the company's internal control over financial reporting.

Getting a good Singapore Auditor services is important to get it done well.

The auditor's report is a key document for investors, creditors, and other interested parties. It provides an independent assessment of the company's financial condition and performance.

About the Author

T.K is an avid writer on business topics, he writes for Koh Management

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Author: T. K.
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T. K.

Member since: Dec 11, 2014
Published articles: 526

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