Explain why a company must have their financial statements audited by an external auditor?
Question: Explain why a company must have their financial statements audited by an external auditor?
One of the most important reasons why a company must have their financial statements audited by an external auditor is to ensure the credibility and reliability of the financial information. An external auditor is an independent professional who examines the financial statements of a company and expresses an opinion on whether they are prepared in accordance with the applicable accounting standards and principles, and whether they present a true and fair view of the company's financial position and performance.
An external audit provides assurance to the shareholders, investors, creditors, regulators, and other stakeholders of the company that the financial statements are free from material misstatements, errors, or fraud. This enhances the confidence and trust of the users of the financial information, and facilitates the decision-making process. An external audit also helps the company to identify and address any weaknesses or risks in its internal controls, governance, or operations, and to improve its efficiency and effectiveness.
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