Which of the following statements best describes the level of accuracy provided by an audit report? B. There is reasonable assurance that the financial statements contain no errors. D. There is reasonable assurance that the financial statements are fairly presented. Answer: Audits provide reasonable assurance that the financial statements are fairly presented, meaning that there is a high degree of probability that they are free of material error, fraud or illegal acts. I’m still confused should it be B or D
i’m guessing the answer is D because statements reported fairly include lack of errors AND fraud and illegal acts. it is the BEST description of the goal of an audit report, whereas answer B only considers one of those 3 factors.
its one of those questions you just give up and take a guess. dont spend too much time trying to think this one on exam - atleast i know i wont. i’d pick one and go with it. since I have a tendency to be wrong on the first, over here on forums i’d pick B, but on examp i’d go with D.
I agree with pepp. One of those that require instincts. I’ll go with D
Its definitely D. Audit was a horrible course FYI =P
As as former auditor - D.
D 100% as a person who reads auditor comments
I too go with D Auditors are not going to look at each and every entry for errors. They are not guaranteeing that the financial statements are error free. They look at potential areas that can be used for manipulation and make sure that the financial reports are free from such violations or presence of material errors that can adversly affect the inferences made from those FS’s. B firmly states that the FS’s are error free; which is wrong.
They just make sure you are preparing statements as required by GAAP. If GAAP has a loophole, and the auditor knows about it and knows you are taking advantage of it, they are not legally responsible for that. They *should* report the violation, i.e., qualified opinio, etc, but legally they walk away scot-free. Auditors on board, please confirm.
Dreary & Strange, once again my strategy to go against my instinct worked.
pepp Wrote: ------------------------------------------------------- > Dreary & Strange, > > once again my strategy to go against my instinct > worked. hehehe very good pepp! I hope this will work on the exam day too!
From the Schweser LOS: An audit is an independent review of an entity’s financial statements. Public accountants conduct audits and examine the financial reports and supporting records. The objective of an audit is to enable the auditor to provide an opinion on the fairness and reliability of the financial statements. I like Pepp’s idea better!