External audits

… is to enhance the degree of confidence of the intended users in the financial statements. This is achieved by the auditor expressing an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework (the Estonian Financial Reporting Standard or International Financial Reporting Standards).

The subject matter of an audit is historical financial information (e.g. the annual financial statements) prepared by the responsible party of the client on the basis of suitable criteria. The responsible party may be, for example, the management board (board of directors) within the meaning of the Commercial Code or a local government authority (municipality or city government), etc.

An audit is a reasonable assurance engagement performed by an auditor in accordance with the Auditing Activities Act and the standards on auditing approved thereunder. Reasonable assurance is not an absolute level of assurance – there are inherent limitations of an audit arising from the fact that most of the audit evidence on which the auditors draw their conclusions and base their opinions is persuasive rather than conclusive.

In the report issued as a result of an audit, the independent auditor expresses an opinion that provides reasonable assurance as to whether (or to what extent) the audited financial statements present the financial position of the entity as at the reporting date and its financial performance and its cash flows for the year then ended in accordance with the applicable financial reporting framework.

The auditor’s report should be appropriately modified, if necessary, taking into account the fact that the objective of the preparation and presentation of general purpose financial reports, including annual financial statements, is to provide knowledgeable users of such reports with relevant and fairly presented information about the financial position, financial performance and cash flows of an entity that they can rely on in making their economic decisions. It is assumed that the users have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information in the financial statements with reasonable diligence.