Why do companies require audits?
This question tests your understanding of the audit process beyond just the basic technical aspects.. Being able to answer this question shows you have a firm understanding of one of the basics of the profession.
"Audits can be required for a variety of reasons. Most commonly, lenders and investors demand audits to ensure that an organization's accounting and financial reporting is free of material misstatement or errors. Some organizations, such as not-for-profits, may be required to have an audit performed by a regulatory body or grant stipulation. In some cases, an organization may choose to have an independent audit performed as good practice."
Community answers are written by other candidates practicing this set. Reading how others frame the same question is one of the fastest ways to sharpen your own.
Anonymous Answer
Investors rely on the general managers and officers of the companies who actually run the show. These investors require an independent CPA to attest to the financial statements of the Company since an audited financial statement gives a reasonable opinion about the financial health of the Company and helps investors place reliance upon the Company's internal controls over financial reporting.
Cindy's Feedback
Great. Can you apply your own situation to this question? How have you been able to help clients assess the financial health of a company?
