Regarding examinations, we need to realize that an audit does not mean every transaction will be examined, as the report will clearly mention that the Financial statements are “presented fairly, in all material aspects”. In practice, this means that while an examination is intended to detect material fraud, it may not detect all fraud. The report will mention that the Financial statements are presented under generally accepted accounting principles in the United States of America. That indicates that they are on the accrual basis, recording revenue when its earned and expenses when the obligation arises. This indicates a more informative premise than cash basis, which reports what occurred in bank accounts or Income Tax basis which follows Income Tax regulations.
The goal is a reasonably fair presentation that is free from material misstatements in the Financial statements, whether such misstatement might come from fraud or error. Thus, the Certified Public Accountant expresses solely an opinion subject to the material misstatement concept by performing procedures to obtain sufficient audit evidence about various amounts and disclosures contained within the entire Financial Statement document.