## Objectives of Auditing — SA 200

As per SA 200, the overall objectives of the independent auditor are:

---

### Objective A — Obtain Reasonable Assurance

To obtain reasonable assurance about whether the Financial Statements are free from material misstatement due to:

Error (unintentional), or
Fraud (intentional)

### Objective B — Report on Financial Statements

To express an opinion on whether the FS are prepared and presented as per the Applicable Financial Reporting Framework (FRF).

---

### The Decision Flow

```

Are FS free from Material Misstatements?

↓ ↓

YES NO

↓ ↓

Unmodified Opinion Modified Opinion

```

---

### Five Checks Before Issuing Opinion

The auditor must ensure FS will not mislead users, by verifying:

1. Accounts are drawn up with reference to entries in records

2. No entries have been omitted

3. Every entry is supported by sufficient and appropriate evidence

4. Information conveyed by FS is clear and unambiguous

5. Amounts are properly presented and disclosed as per Applicable FRF

6. Statement of Account shows a true and fair picture of assets, liabilities, and business operations

Worked example

### Example 1

FS of PQR Ltd show revenue of ₹50 lakhs with no material misstatement → Auditor obtains reasonable assurance and issues Unmodified Opinion stating FS present a true and fair view.

### Example 2

Auditor of XYZ Ltd discovers revenue was deliberately inflated by ₹8 lakhs (fraud). The FS contain a material misstatement → Auditor issues Modified Opinion. Primary objective (reasonable assurance) was achieved — it revealed the problem.

⚠️ Common exam mistakes

Writing that the primary objective of audit is to detect fraud — the primary objective is to obtain reasonable assurance on whether FS are free from material misstatement; fraud detection is a consequence, not the objective.
Mentioning only one objective — SA 200 gives two: (A) reasonable assurance, and (B) report on FS. Both must be stated in exam answers.
Forgetting to mention 'error or fraud' when describing material misstatement — both causes must be included.

Bare-Act text SA 200 · Standards on Auditing — ICAI · click to expand

Overall Objective of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →