Question

In: Accounting

auditors provide a certain level of assurance in a fincancial statement audit. State the level of...

auditors provide a certain level of assurance in a fincancial statement audit. State the level of assurance that auditors provide and explain the logic behind why they provide that particualr level of assurance

Solutions

Expert Solution

An auditor is required to give reasonable level of assurance that the Financial Statements are free from material misstatement and along with that , the financial stateements also comply with Generally Accepted Accounting Principles.

Because of Inherent limitations, an auditor gives reasonable assurance and not absolute assurance.

Following are the inherent limitations which restricts an auditor from giving absolute assurance:-

1) The preparation of financial statements by the management of organization involves many judgements for accounting estimates and provisions etc. , hence the evidences with respect to them can only be pursuasive and not conclusive, hence only reasonable assurance can be obtained.

2) For timely auditing , the auditor needs to perform audit on sampling basis and devotes more time towards risky areas, so there can be scope for some risk due to sampling and hence only reasonable assurance can be obtained.

3) As auditing procedures requires obtaining the information from management also and chances are that the management may not give complete information . Management may be involved in carefully designed fraud .hence only reasonable assurance can be obtained.

Please upvote/thumbs up if the solution was helpful


Related Solutions

Auditors provide "reasonable assurance" that the financial statements are "fairly stated, in all material respects." Questions...
Auditors provide "reasonable assurance" that the financial statements are "fairly stated, in all material respects." Questions are often raised as to the responsibility of the auditor to detect material misstatements, including misappropriation of assets and fraudulent financial reporting. a. Discuss the concept of "reasonable assurance" and the degree of confidence that financial statement users should have in the financial statements. b. What are the responsibilities of the independent auditor in the audit of financial statements? Discuss fully, however, do not...
Question No 3: (10 Marks) “The role of internal audit is to provide independent assurance that...
Question No 3: “The role of internal audit is to provide independent assurance that an organisation's risk management, governance and internal control processes are operating effectively” On the light of the above statement, explain what features of an internal audit department would enable the external auditor to trust on the work done by the internal auditing department? Use your own views and response to question. (300 words)
In the planning stage of an audit, auditors frequently consider certain financial ratios. For either of...
In the planning stage of an audit, auditors frequently consider certain financial ratios. For either of the following two ratios, which are at unusual levels, please state one kind of error or fraud which would explain why the ratio is at an unusual level this year. Ratio #1   The number of days of sales in accounts receivable has increased from 35 to 60. The industry average is 34.       [Days of sales in accounts receivable = {ending accounts receivable /sales}*365] OR      Ratio #...
1- Auditors are required to actively conduct a financial statement audit with the mindset that fraud...
1- Auditors are required to actively conduct a financial statement audit with the mindset that fraud may exist. What is the general process that an auditor goes through to assess the risk of fraud and test accordingly? 2- A client seeking to recover damages from an auditor for breach of contract in an action based on negligence must show that the auditor had a duty not to be negligent. Identify at least three defenses an auditor can use against a...
What is the: a) Overall objective of a financial statement audit? b) Opinion expressed by auditors...
What is the: a) Overall objective of a financial statement audit? b) Opinion expressed by auditors in an external attest audit? c) Itemise and explain the types of opinion an external attest audit might express
1. Which of the following services provides the lowest level of assurance on a financial statement?...
1. Which of the following services provides the lowest level of assurance on a financial statement? a. An audit. b. A review. c. Neither service provides assurance on financial statements. d. Each service provides the same level of assurance on financial statements. 2. The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not ________ are detected. a. important to the financial statements b. statistically...
Auditors generally use a financial statement cycle approach when performing a financial statement audit. Describe the...
Auditors generally use a financial statement cycle approach when performing a financial statement audit. Describe the transactions flow, using specific examples, from journals to financial statements that produce financial statements.
audit procedure that the audit may use in providing assurance engagement
audit procedure that the audit may use in providing assurance engagement
what type of services are CPA auditors allowed and disallowed to provide their public audit clients?...
what type of services are CPA auditors allowed and disallowed to provide their public audit clients? private audit clients? Please give examples for both please
jenny and Sam are the auditors for the AAA audit firm. They discuss an audit program...
jenny and Sam are the auditors for the AAA audit firm. They discuss an audit program for the sales account. Jenny and Sam disagree about whether they should use procedure (1) or (2) below to test the Occurrence assertion for the sales account: Procedure (1): Select a sample of sales invoices, delivery dockets and customer orders and agree the details to the details recorded in the sales journal. Procedure (2): Select a sample of sales from the sales journal and...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT