What is the Objective of an External Audit and What Standards are Required?

Weigh the fairness of your financials
with an objective assessment by an
external auditor and gain credibility.

An audit is a systematic process of objectively obtaining and evaluating the accounts or financial records of a governmental, business, or other entity. Whereas some businesses rely on audits conducted by employees—these are called internal audits—others utilize external or independent auditors to handle this task (some businesses rely on both types of audits in some combination).

The primary objective of the external audit is to add credibility to the financial statements of the management.

The role of the external auditor is to render an independent professional opinion on the fairness of financial statements to the extent that is required by generally accepted auditing standards. External audits are often used by smaller businesses that do not have the resources or inclination to maintain internal audit systems.

The auditing process is based on standards, concepts, procedures, and reporting practices that are primarily imposed by the American Institute of Certified Public Accountants (AICPA). AICPA general standards and standards of field work declare that:

• External audits should be performed by a person or persons having adequate technical training and proficiency as an auditor.
• The auditor or auditors maintain complete independence in all matters relating to the assignment.
• The independent auditor or auditors should make sure that all aspects of the examination and the preparation of the audit report are carried out with a high standard of professionalism.
• The work is to be adequately planned and assistants, if any, are to be properly supervised.
• Independent auditors will carry out proper study and evaluation of the existing internal controls to determine their reliability and suitability for conducting all necessary auditing procedures.
• External auditors will make certain that they are able to review all relevant evidential materials, whether obtained through inspection, observation, inquiries, or confirmation, so that they can form an informed and reasonable opinion regarding the quality of the financial statements under examination.

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