This memo is written to inform you of how the auditors" opinion recognizes the absence of absolute accuracy of a company's financial statements.
In order for an auditor to show that his/her opinion is absence from absolute accuracy, he/she prepares an Independent Auditors" Report. This report, which is used by independent Certified Public Accountant, gives the Accountants" opinion about how fairly the financial statements have been presented. It deals with the company's credibility of the financial statements and is addressed to the Board of Directors and Stock Holders. These independent auditors, using the financial statements prepared by the managers of the company, add the necessary creditability to management figures.
This short report is divided into three sections. The first section is the introductory paragraph. It identifies the financial statements subject to the auditors" report and states that the company's management is responsible for the financial statements and the auditors are responsible for expressing an opinion on the financial statements.
The second section is the scope section. This section states that the examination was conducted according to the generally accepted accounting principles (GAAP). It describes the nature and objectives of the audit. This section makes it known that the auditors gives no guarantees that the financial statements are free from transactions or from effects of errors (University of Phoenix, 2002, p 253).
The third section is the opinion paragraph. This section states the auditors" results of the audit. It does not guarantee that the statements are absolutely correct. This section simply state the opinion about whether the financial statements "present fairly" in accordance with the GAAP.
As you have read, the Independent Auditors" Report is a very important document for auditors. The information in this document speaks specifically on what the auditors" responsibilities are.