Which of the following characteristics accurately describes an audit? A) Fraudulent activities are always discovered by...

Which of the following characteristics accurately describes an audit?

A) Fraudulent activities are always discovered by auditors

B) Provides absolute assurance to the users of the financial statements

C) All transactions of an organization are reviewed

D) Obtains sufficient appropriate evidence to reduce risk to an acceptably low level.

C and D makes sense. Which one is correct?

Solutions

Expert Solution

Correct option is D) Obtain sufficient appropriate evidence to reduce risk to an acceptable low level

Audit is an independent examination of Financial information of an entity ( Profit as well as not profit oriented) irrespective or its size or legal form in order to express its opinion that financial state of a entity is free from Material mistatement and give true and fair view.

Audit Provide reasonal assurance and not absolute assurance there involve risk of detection .

Audit is done base on the risk and materiality and time and the volume of data involve , hence Auditing can be done based on sampling if low risk is involve , can be done follwing substansive procedure if risk involve is high . Hence covering of transaction will be based on materiality , time , size and Risk involve in entity.

Auditor has to provide reasonable assurance and to give opinion that the financial state of company give true and fair view , for that auditor collect suffiecient and appropriate audit evidence to satisfied to satisfy that their is no risk of material mistatement and if any then to reduce the risk of material mistatement or to reduce it to acceptable low level.

ekkarill92 answered 2 years ago

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