A financial audit is conducted to provide an opinion whether "financial statements" (the information is verified to the extent of reasonable assurance granted) are stated in accordance with specified criteria. Normally, the criteria are international accounting standards, although auditors may conduct audits of financial statements prepared using the cash basis or some other basis of accounting appropriate for the organization. In providing an opinion whether financial statements are fairly stated in accordance with accounting standards, the auditor gathers evidence to determine whether the statements contain material errors or other misstatements.
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👉 External Audit in the context of Business-to-business
Business-to-business (B2B or, in some countries, BtoB or B4B) refers to trade and commercial activity where a business sees other businesses as its customer base. This typically occurs when:
- A business sources materials for its production process for output (e.g., a food manufacturer purchasing salt), i.e. providing raw material to the other company that will produce output.
- A business needs the services of another for operational reasons (e.g., a food manufacturer employing an accountancy firm to audit their finances).
- A business re-sells goods and services produced by others (e.g., a retailer buying the end product from the food manufacturer).
Business-to-business activity is thought to allow business segmentation.