Final answer:
Users of an issuer's financial statements demand independent audits because it provides assurance, credibility, detects and prevents fraud or errors, and adds transparency to the financial reporting.
Step-by-step explanation:
Users of an issuer's financial statements demand independent audits because it provides assurance and credibility to the financial information presented by the company. An independent audit is conducted by an external auditing firm that is separate from the company and its management. By having an independent audit, users can have confidence that the financial statements are free from material misstatements and are presented in accordance with the generally accepted accounting principles (GAAP).
Independent audits also help in detecting and preventing fraud or errors in the financial statements. Auditors perform various audit procedures to verify the accuracy and completeness of the financial information, such as examining supporting documents, conducting physical inspections, and performing analytical procedures. Their objective is to provide reasonable assurance that the financial statements are reliable and can be trusted by the users.
Furthermore, external audits add transparency to the company's financial reporting. The audit process involves evaluating the company's internal controls and assessing their effectiveness in preventing and detecting financial misstatements. This helps identify any weaknesses or deficiencies in the company's control environment and enables management and stakeholders to take corrective actions.