Financial Statement Audit Objectives:
(1) Determine if the figures presented are fair representations of the company’s operations for the year in order to come up with an accurate computation of tax liabilities.
(2) Verify if the report is substantially error-free. Adjustments or corrections, if any, must not result in any material difference that could alter the decisions of the financial statement users, had they been presented with the correct figures. It is quite important for public companies to present financial reports that reflect the genuine condition of the business to furnish investors and creditors with an accurate basis for investment or lending decisions.
(3) Assess if the figures presented were computed, estimated, recorded, and presented in accordance with the generally accepted accounting principles based on fundamental and GAAP rules. Management has to make competitive decisions by using the facts and figures contained in financial reports that were prepared with comparative uniformity against those of other companies engaged in a similar trade.
(4) Test-check the consistency by which said policies and procedures were applied. Inconsistencies in application of policies and procedures can cause distortion of ratios and proportions.
(5) Evaluate if the financial statements were prepared under an internal control structure, wherein counter-checking measures, aimed at minimizing and eliminating the occurrence of fraud or error, are integrated. In view of such counter-checking measures, assess the degree of compliance within the company as a whole to pinpoint possible breakdowns or weaknesses.
(6) Conduct a random check to find out if there are no breakdowns in internal control measures that may have allowed the perpetration of fraud.
(7) Trace material errors to determine their root causes, and find out how and if they were adjusted, rectified, or treated before they were used as figures for financial statement presentations.
(8) Make a report on all instances of errors noted, whether immaterial or substantial. Cite instances of noncompliance with internal controls, IRS or other government regulations, and any inconsistencies in the application of fundamental, GAAP, IRS, or company rules and policies.
(9) Make recommendations on how to preclude the recurrence of negative findings that present possible avenues for fraud perpetration or those that make the company vulnerable to third party liabilities including the IRS.
(10) Make a separate report about material findings that can substantially alter the results of operations. The report must contain the details, the causes, and recommendations for further investigations to determine the extent of damage that may call for legal actions against those responsible. In some cases, recommendations for damage control will also be necessary to curtail the company’s vulnerability to lawsuits.