Question

Compare and contrast the difference between management's and auditor's responsibilities. Provide examples.

Answer 1

Management Responsibilities

The management responsibility is fairness representations and preperations of the financial statements as it carries with privilege of assessing which disclosure is important.

Management is responsible for acquiring the sound policies as well as establish and maintain the internal control among other things like report, initiate, process and record transactions in consistent with the assertions of management in the financial statements.

The fair and true presentation of the financial statements as per GAAP (Generally Accepted Accounting Principles) is an important part of the management responsibility.

Auditor's responsibility

The responsibility of auditor is limited to conducting the audit investigation and report the results as per GAAP.

The auditor may assist in the making or preparations of the financial statements and also to express their view point on the financial statements.

The auditor has responsibility for planning and conducting the audit in order to attain reasonable assurance whether statements are free from material misstatement or caused by fraud or error.

The auditor could make suggestions regarding the content of the financial statements grounded on information available from management while performing the audit.

For example, the auditor may counsel or advice the management as to the applicability of the new accounting principles and through the course of the audit, the auditor may suggest adjustments to the statements of the client. Though the acceptance of the advice and involve the suggested adjustment in the financial statements will not alter or change thee basic segregation of responsibility. And ultimately, the management is responsible for all the decisions in relation to the content of the financial statements.