The purpose of an audit

The purpose of an audit is for an independent third party to examine the financial statements of an entity. This examination is an objective evaluation of the statements, which results in an audit opinion regarding whether the statements have been presented fairly and in accordance with the applicable financial reporting framework (such as GAAP or IFRS). This opinion greatly enhances the credibility of the financial statements with users, such as lenders, creditors, and investors. Based on this opinion, users of the financial statements are more likely to provide credit and funding to a business, possibly resulting in a reduced cost of capital for the entity.