Objectives of Auditing: Primary and Secondary

The objectives of auditing are conventionally split into primary and secondary objectives.

Primary objective

The single primary objective of an audit is to enable the auditor to express an independent, expert opinion on whether the financial statements show a true and fair view of the entity's profit or loss (through the Profit & Loss Account) and its financial position (through the Balance Sheet), prepared in accordance with the applicable accounting principles and statutory requirements.

Secondary objectives

While forming that opinion, the audit process naturally serves several secondary objectives:

• Detection and prevention of errors — clerical, arithmetical, and errors of principle in the books (Unit 4, Errors and Frauds, builds on this).
• Detection and prevention of fraud — both misappropriation of cash/goods and manipulation of accounts.
• Verification of the existence and valuation of assets and liabilities.
• Ensuring compliance with the applicable law (e.g. Companies Act provisions) and with accounting standards.
• Deterrent effect — the mere knowledge that accounts will be audited discourages carelessness and dishonesty among staff.