The objective of an audit engagement is to enable an independent professional public accountant to render an opinion on the fairness of the client’s financial statements. Audited financial statements provide the highest level of assurance and are the accepted means by which many business corporations report to shareholders, to bankers, to creditors and to government. Many not-for-profit organizations also use audited financial statements to report to government and stakeholders.
Audits are the most entailed engagement in terms of the scope of work. The auditor must plan the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Through the study and evaluation of the company’s system of internal control, and by inspection of documents, observation of assets, conduction of inquiries within and outside the company and by other generally accepted auditing procedures, the auditors will gather evidence necessary to determine whether the financial statements present a fair picture of the company’s financial position and its activity during the period being audited. Because of the extensive audit procedures to provide this level of assurance, the audit engagement is the most costly of the year end engagement levels.