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Audiit and finnancial ccontrol

6.4 Thhe purposses of exteernal audiit

Internaational Stanndards on Auditing (ISAs) statee that the ooverall objeectives of the
externaal auditor aare:

 too obtain reaasonable aassurance about wheether the financial staatements aas a
wwhole are frree from mmaterial missstatementt, whether due to frauud or error

 too express aan opinion on whetheer the finanncial statemments are pprepared, in all
mmaterial resspects, in aaccordancee with an aapplicable ffinancial reeporting
fraamework.

6.5 AAdvantagess and disaadvantagees of an exxternal audit

Advanttages Disadvantaages

 Disputes bbetween mmanagemennt  
may be more easily settled e.gg. a
partnership which haas  
complicateed profit-shharing
arrangemeents may rrequire an
independeent examinnation of
those accoounts to ennsure
accurate aassessmennt and

division off those profits.
 Major changes in owwnership mmay

be facilitatted if past accounts

contain ann unqualifieed audit
report, for instance, where twoo
sole traders merge their
businessees.

 Applications to third parties forr
finance maay be enhaanced by
audited acccounts.

 The audit is likely to involve ann
in-depth eexaminationn of the
business aand may enable the
auditor to give consttructive
advice to mmanagemeent on
improving the efficiency of the
business.

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