Why do independent auditors report on financial statements?

Independent auditors report on financial statements primarily because there are differing interests between the company that prepares the statements and the various stakeholders who use them. This divergence of interests often creates a potential for conflict, as management may have incentives that do not align with the best interests of shareholders, creditors, and other parties relying on the financial information.

The presence of these varied interests necessitates an objective evaluation of the financial statements. Auditors provide assurance through their independent assessment, ensuring that the information presented is accurate, complete, and in accordance with applicable standards. This helps to enhance the credibility of the financial statements, instilling confidence in users who may otherwise have doubts about the reliability of the information due to the inherent self-interest of management.

In contrast, while compliance with international accounting standards is important, the primary motivation for independent audits goes beyond mere compliance; it is fundamentally about verifying integrity and trustworthiness in the face of potential biases in financial reporting. Consequently, auditors do not provide a definitive answer on management honesty, nor do they ensure that statements are reliable without question. Their role is to provide reasonable assurance based on their findings that the financial statements are free from material misstatement, which is essential in mitigating the risks arising from divergent interests.