Final answer:
The purpose of an audit is to provide financial statement users with an opinion by an independent auditor on the fairness and accordance of financial statements with a financial reporting framework, playing a key role in corporate governance. Option A is correct.
Step-by-step explanation:
The purpose of an audit is to provide financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework. Audits play a crucial role in corporate governance, serving as a check on the financial information provided by companies.
For instance, the audit firm is tasked with reviewing the company's financial records and providing certification that the information is reasonable. Auditors contribute to the oversight mechanism alongside the board of directors and outside investors, such as those managing large mutual funds or pension funds.
The Lehman Brothers case highlighted a failure in corporate governance where investors were misinformed about the firm's operations. An audit does not provide management with assurance to maximize profits, nor does it offer absolute assurance that financial statements conform to GAAP, but rather it aims to give a reasonable level of assurance that the financial statements are free from material misstatement.