What is the primary purpose of an audit?

The primary purpose of an audit is to examine financial records and statements to ensure their accuracy and compliance with accounting standards. This involves a thorough review of a company's financial reporting to verify that the information presented is truthful and adheres to established accounting principles, such as GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards). Audits enhance the credibility of financial statements, providing assurance to stakeholders, including investors, creditors, and regulatory agencies, that the company's financial health is portrayed reliably.

A successful audit can affirm the integrity of a company’s financial reports, which is crucial for maintaining trust and transparency in the financial markets. This function helps mitigate the risk of fraud and misrepresentation, thus serving a vital role in the overall financial system.