ACCA Applied Knowledge · Business and Technology · Accounting and finance functions within business organisations
Which of the following best describes the primary purpose of an external audit of a company's financial statements?
The main purpose of an external audit is to give an independent opinion on whether the financial statements show a true and fair view. It is not a guarantee of finding all fraud, nor does it involve preparing the accounts, which remains management's responsibility.
- ATo express an opinion on whether the financial statements give a true and fair viewCorrect
- BTo detect every fraud and error in the accounting records
- CTo advise management on how to improve operational efficiency
- DTo prepare the financial statements on behalf of the directors
Explanation
The external auditor gives an independent opinion on whether the financial statements give a true and fair view (or are fairly presented). Auditors do not guarantee detection of all fraud, since they work on a test basis. Efficiency advice is more typical of internal audit, and preparing the statements is management's responsibility.
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