1.

Audit of Financial Statement

Audit of financial statements is actually part of the broader concept of the attestation function.
To attest to information mean to provide assurance as to fairness or dependability of financial
statement. Certified Public Accountants (CPAs) attest to a host of other types of information
including the reasonableness of financial forecasts, the adequacy of internal control and
compliance with laws and regulations. To attest to financial statements is to provide assurance
as to their fairness and dependability. The attest function consists of two phases. The first is the
performance of an audit; the second is the issuance of an audit report. The attest function leads
to credibility to management's representations that are contained in the financial statements.

The audit of financial statements ordinarily covers the balance sheet and the related statements of
profit and loss and cash flows. Financial audit generally is conducted to ascertain whether the
financial statements present true and fair views of the financial position and working results of
an enterprise or organization. The goals of audit of financial statements are to determine whether
the statements have been prepared in conformity with generally accepted accounting principles.
The aim of an independent financial audit is to ascertain if the financial statements of an
enterprise are reliable and dependable. Financial statements audits are normally performed by
certified public accountants. The contribution of the independent financial audit is to give
credibility to financial statements. Credibility, in this usage means that the financial statements
can be believed that is, they can be relied upon by outsiders, such as stockholders, creditors,
government and other interested third parties. The word “audited” when applied to financial
statements means that balance sheet, profit and loss statements and cash flows are accompanied
by an audit report prepared by independent auditors expressing their professional opinion as to
fairness of the enterprise's financial statements. Financial statements prepared by management
and released to outsiders without first being audited by independent auditors leave a credibility
gap.