What is Audit of Financial Statements

External audit of financial statements plays a key role in achieving transparent financial reporting, since its purpose is to provide reasonable assurance that the presented financial statements are free of material misstatements due to fraud or error. In the process of fulfilling this role, auditors must be adaptable, especially when it comes to technological advancements. This chapter explains the effect that new technologies have on audit of financial statements. In addition to summarizing the technological changes that impacted the audit profession in the past and therefore introduced new generations of audit, the authors have identified issues and challenges in the way the audit is currently performed. Some of the new technologies that are discussed in this chapter have the potential to mitigate these issues. However, new challenges and risks may be introduced with accepting these technologies in the process of financial reporting and auditing.