How do external auditors assess financial statements?

What methods do external auditors use to assess financial statements?

External auditors typically use methods like analytical procedures, tests of controls, and substantive testing to assess financial statements.

Can you explain what substantive testing involves?

Substantive testing involves examining financial transactions and balances to ensure accuracy and compliance with accounting standards.

How do auditors determine the materiality of financial statements?

Auditors determine materiality by assessing the significance of an amount, transaction, or discrepancy in relation to the overall financial statements.

What are the common red flags auditors look for?

Common red flags include unusual transactions, discrepancies in records, and significant changes in financial ratios.