Formalization of User Confidence in Financial Information on Audit Results
Keywords:
confidence, elements o f confidence, ways o f formalization, period of unlimited confidence, period of conditionally limited confidence, period of limited confidenceAbstract
Problem solutions in audit are aimed to provide users with sufficient confidence in its functional capacities when formulating, justifying and implementing economic decisions. The source of this confidence is professional opinion of an auditor, formed on the basis of the procedures and activities related to the evaluation of their results. Auditor opinion is formalized in the audit report that is supposed to include the results of the auditor’s activities. The aim of the study is to analyze the aspects of formalization of confidence provided to users of financial information by the results of audit.
The formalization method depends on user’s access to data carrier. When making up the report, an auditor can formalize the opinion in either direct or indirect way. The direct way is used when the results of auditor’s work are transferred from the working papers to the report (e. g. to paragraphs containing auditor’s opinion or explanations to it) without formal change. The indirect way is used when the data of working papers are going to be modified, summarized and systematized in separate paragraphs of the report .
We propose to identify the three periods of confidence.
- The period of unlimited confidence; its duration is not fixed because the financial information based on assumptions and conceptual foundations workable in the past does not require adjustments due to their change or the change is not expected;
- Conditionally limited period of confidence, when the information is expected to be used once adjustment is made according to the change in the assumptions upon which it is formed;
- Period of limited confidence, which usually has fixed duration.
To our opinion, the proposed approach to formalizing the confidence of users of financial information allows auditors and users to have the appropriate understanding of the information and its functional capacities.
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