1. Why is auditing necessary?

Auditing is necessary to examine the accuracy, reliability, and fairness of financial

statements and identify any omissions or errors, and misstatements that will be
beneficial to the intended users and management. This is also necessary to
determine if the financial statements are in compliance with accounting standards
and regulations. In addition, auditing helps management determine any
irregularities in the company's operations and internal control and create
necessary measures to address them.

2. Explain the fundamental purpose of auditing financial statements as

provided for in Philippine Standard on Auditing (PSA) 120.

According to the Philippine Standard on Auditing (PSA), the objective of an audit

of financial statements is to enable the auditor to express an opinion as to
whether the financial statements are prepared, in all material respects, in
accordance with an identified financial reporting framework. This means that
auditing financial statements will help them determine if the financial statement is
fairly presented and provide intended users with assurance of the accuracy of the
financial statement.

3. Why are auditor's reports important to users of financial statements?

Auditor's reports are important to users of financial statements because they

enhance the credibility and reliability of a financial statement. The auditor's report
informs users of the auditor's opinion as to whether or not the financial
statements are fairly stated or in compliance with accounting standards. The
users rely on the findings in the report because it provides an independent
assessment of the financial statements of a company, which is beneficial to their
decision-making.