The independent auditor adds credibility to the clients financial report by

An audit is essential as it provides credibility to a set of financial statements and gives the shareholders confidence that the accounts are accurate and fair; it can also help to improve a company’s internal controls and systems. A financial statement audit examines an entity’s financial statements and conducting disclosures by an independent auditor. The consequence of this examination is a report by the auditor demonstrating the fairness of the financial statements and associated disclosures. The auditor’s report must convoy the financial statements when they are issued to the intended recipients.

The cause of the financial statement audit is to add credibility to a business’s reported financial position and performance. Audits have become increasingly common as the complications of the two primary accounting structures, Generally Accepted Accounting Principles and International Financial Reporting Standards, have enlarged and because there has been an ongoing series of disclosures of fraudulent reporting by significant companies.

Financial statement audits are a compliance exercise and a chance to gain knowledge to initiate positive business consequences. In many cases, though, companies are not taking full advantage of the intuition that audits provide, according to a recent survey report:

• More than three-fourths (79%) of executives and 91% of audit committee members say financial statements audits identify chances to enhance business performance.
• Almost half (46%) of executives and even more audit committee members (62%) say it’s at least rather likely that they would have forfeited essential insights if the audit had not occurred.
• Companies that regularly maximize the audit’s information are more likely to have attained growth over the past three to five years.

Through audits, companies may learn new information about their industry and market, locate limitations in processes and policies, and recognize inefficiencies and risks. In addition, expanded use of data analytics is helping auditors look at vast pools of data in a range of areas to find information that could be benefited to clients.

Enhancing audit committee effectiveness

Effectiveness often hinges on the chair’s point. The crucial characteristics of a strong audit committee chair are often personal attributes. They should be recognized for their leadership and vision and be perceived by other committee members and management to set and supervise the audit committee’s members and management to set and control its agenda. For enhancing audit committee effectiveness in business, the following are ways to improve audit committee effectiveness:

• Audit committee clarity

Increased clarity on how an audit committee has discharged its duties is crucial and enables a more illuminated assessment of its performance and effectiveness. As a result, many corporate governance codes and regulations include requirements around audit committee disclosure. In addition, voluntary disclosures continue to grow, emulate that audit committees respond to evolving expectations of investors and other stakeholders.

• Effective communication

The importance of fruitful communication flows to and from the audit committee cannot be overstated. It comprises written and formal and informal, presenting with management, internal and external audit, the CFO and finance function, and the board. The audit committee is also required to transmit with the board how it has discharged its responsibilities. It is not requisite for the board to simply ‘rubber stamp’ reports from the audit committee; there needs to be complete discussion and deliberation on key aspects of the audit committee’s work and any important issues they have identified that warrant the full board’s attention.

• Committee composition- including appropriate skills, competencies and expertise

Ensuring the correct composition of the audit committee is vital but can be demanding. Requirements vary across jurisdictions, but usually, there must be at least one financially literate member. It can put a significant burden on one individual if they are the only person on the audit committee to have reporting and accounting expertise. While the audit committee can depend on outside expertise, an effort must be made to provide continuing professional training to understand emerging issues and develop an awareness of best practices.

• Strength of finance function

The finance function is responsible for producing dependable and auditable information for external disclosure. Therefore, the strength of the finance function is critical in supporting the oversight role of the audit committee, which can be severely hesitated by a weak finance function that lacks capacity, expertise, or effective CFO leadership. Therefore, considerations for the audit committee include whether the finance function is appropriately staffed and resourced, has suitably qualified people in a critical position, and whether it has support for its continued development.

Today it is straightforward to choose the best audit firms in India. Financial statement audits are helping companies improve their performance; according to a survey, around three-quarters of the top executives and 91 per cent of the audit committee members said audits of financial statements recognize opportunities to improve business performance. The auditor should review and access the conclusions drawn from the evidence obtained through the implementation of procedures.

Leave a comment about what are your opinions on the effectiveness of financial statement audit over the business.

Which of the following best describes why an independent auditor reports on financial statements?

Why is an independent audit critical to confidence in financial reporting?

What is the independent auditor's report?

Why is an independent auditor asked to express an opinion on the fair presentation of financial statements?