Objectives of Auditing

The shareholders, directors and the auditor who are stakeholders of audit have some objectives for the financial statements audit.  Generally the objectives of auditing are divided into two (2) namely a) primary objective and b) secondary objectives.

 Primary objective of auditing

This refers to the statutory objective for requiring financial statements audit.  The primary objective of auditing is to enable the auditor to express opinion as the true and fair presentation of the financial statements.  This in a way adds credibility to the financial statements.

 Secondary objectives of auditing

This refers to non-statutory objectives for requiring financial statements audit.  These subsidiary objectives may be what some parties expect from audit other than what is expected by law.

The secondary objectives of auditing are as follows:

1.      Detection and Prevention of Errors

As you may be aware already from your accounting studies, there are many errors which accounting staff can commit and yet the trial balance will not reveal.  Some of these errors are error of commission, error of omission, compensating error and error of principle.  During an audit, the auditor uses his expertise when examining the records and books and as independent person/body will identify these errors which had eluded the preparers.  This will also ensure that many errors do not find their way into the financial statements.

2.      Detection and Prevention of Fraud

Fraud is a deceptive act committed to obtain undue advantage.  Frauds are committed intentionally and deliberately either by junior staff or senior staff and these frauds in many ways may affect the financial performance of the company.  Some of the possible frauds in an organization are:

a)      Misappropriations of funds

b)      Misappropriations of goods

c)      Falsification and manipulation of accounts

d)      Window dressing

            These frauds may affect the true and fairness of the financial statement.  So in    performing his duties, the auditor exercises the utmost care in order to detect these frauds.

3.      System Improvement

International Standard on Auditing requires auditors to have many communications with those charged with governance of the company and management.  Some of these communications related to weakness in accounting and internal control systems. The expertise of the auditor helps the company to improve the accounting and internal control systems.