For example, without accurate financial reports, minority shareholders cannot be certain that the firm in which they have invested their wealth is being managed in the best interests of all shareholders and not just those who control the firm’s management. Financial reports are essential to enable a firm’s board of directors to evaluate the managers they have appointed.
They are an essential tool for a firm’s board of directors, which is why a firm’s internal auditor usually reports directly to the board and not to the management, so that the board can be confident in the veracity of the financial reports.