preview

The Role Of External Auditors On Public Financial Statements

Decent Essays

External auditors play important roles in delivering credibility of public financial statements to stakeholders outside of the audited firms (The Institute of Chartered Accountants in Australia, 2008). Published financial statements can be used by stakeholders as a basis for evaluating the financial position of firms, analyzing the performance of management, or making investment decisions (International Organization of Securities Commissions, 2002). Published financial statements will also be used by institutions such as rating agencies to decide the worthiness of the firms, and by banks, to decide the amount of loans that banks are willing to lend to (International Organization of Securities Commissions, 2002). Thus, the public is significantly influenced by the examined financial statements by external auditors (International Organization of Securities Commissions, 2002). For management, they need to make estimates and judgments to write financial statements, such as choosing among alternative accounting principles by considering the existing and potential clients base of the firm; Whilst, the auditors are responsible of examining statements made by management and to express opinion on them (The Institute of Chartered Accountants in Australia, 2008). Auditors will collect evidence to ensure reasonable assurance that the disclosures and detailed numbers in the statements are free of material misstatements (Francis and Krishnan, 1999). In addition, auditors also

Get Access