Since the need for external financial audits has come to light, the function of one is to bring light to all financial operations of a publicly or privately traded company with the targeted outcome of keeping confidence in the world’s financial system. Nonetheless, businesses that do not sell shares, are additionally subject to such inspections.
Furthermore, the purpose of such an audit is to enforce compliance with fair and truthful financial reporting. What this means is that all businesses should follow a set of guidelines that state how to account for all financial dealings, or the “generally accepted accounting principle”, (GAAP), which are known, and understood on an international level.
A financial audit is carried out by a certified chartered accountant as an “audit engagement” and is clarified by them, as to the meaning of the term when an audit is taking place. AS such, and audit of this magnitude follows specific guidelines similar to a company following the GAAP rules for bookkeeping and accounting. As it stands there are different types of audits, thus the need for clarification when approached for an audit,
Accordingly, the provincial and federal governments in Canada require all business to prepare financial statements to facilitate such audits to take place. That stated the when a local business passes and audit it builds trust in the financial strength in the community.