CAT / FIA FAU Syllabus A. Business Environment And Audit Framework - Nature of an audit - Notes ^{1 / 6}

For the financial markets to be efficient they need trust.

How to build trust

• The investors need to believe that the financial statements (FS) of companies are true and fair (free from errors).

• This assurance is provided by external accountants (auditors) that audit (check) the FS of companies.

• Auditors need to be INDEPENDENT and they work in the best interest of shareholders rather than the companies being audited

Remember...

1. Owners

   The company is owned by the owner (shareholders).

2. Managers

   The managers manage the company and prepare the FS for the owner.

3. Auditors

   The Auditors are apponted by the owner and make sure that the FS are free from the material misstatement.