An audit provides the highest level of assurance. An audit is a methodical review and objective examination of the financial statements, including the verification of specific information as determined by the auditor or as established by general practice.
The objective on an audit engagement is to enable independent professional public accountants to render an opinion on the fairness of the client’s financial statements.
Audited financial statements are the accepted means which many business corporations report to shareholders, to bankers, to creditors and to government.
The financial statements subject to audit are the responsibility of the entity’s management. The auditors’ responsibility is to express an opinion on those financial statements. The auditors must plan the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Through the study and evaluation of the entity’s system of internal control, and by inspection of documents, observation of assets, making inquiries within and outside the entity, 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 entity’s financial position and its activity during the period being audited.
We also perform physical inspections by observing inventory, as applicable, counting methods and by performing test counts. We document and test each operating cycle, including sales and cash receipts, expenses and cash disbursements, and payroll. Our audit papers include a detailed work program to document the examinations and tests performed, as well as the client’s supporting work papers.
All public companies are required to have an annual audit, but some nonpublic entities must undergo an annual audit as well. These include local governments, not-for-profit agencies and other organizations receiving governmental grants.