What is the primary purpose of financial audits?

The primary purpose of financial audits is to ensure the accuracy of financial statements. Financial audits are systematic examinations of an organization's financial records and statements conducted by external auditors. The goal of these audits is to provide an independent assessment of the financial health of the organization and verify that the financial statements are free from material misstatements and consistent with accounting standards. This process enhances the reliability of information provided to stakeholders, including investors, creditors, and regulatory bodies, allowing them to make informed decisions based on accurate and truthful financial reporting.

Developing annual budgets, optimizing investment strategies, and predicting market fluctuations are important functions in financial management but do not define the core objective of a financial audit. Each of these functions serves specific managerial or strategic purposes that complement the financial audit, but they do not focus on verifying the integrity and accuracy of financial statements, which is the essence of the audit process.