Indicate whether each of the following statements about the auditor's role in financial accounting is true or false. ________ a) A financial audit guarantees the accuracy of all amounts reported on the financial statements.________ b) A financial audit is a detailed examination of a company's financial statements and underlying accounting records.________ c) The primary responsibility of the independent accounting firm is to the public.________ d) The most favorable type of audit report is called a qualified opinion.________ e) The ultimate responsibility for the financial statements lies with management of the company rather than the independent accounting firm.

Question

What will be an ideal response?

Answer 1

a) F b) T c) T d) F e) T

a) This is false. Audits are designed to provide reasonable, but not absolute, assurance that financial statements are materially correct.
b) This is true. A financial audit is a detailed examination of a company's financial statements and underlying accounting records.
c) This is true. Although the independent auditors are chosen by, paid by, and can be fired by their client companies, the auditors are primarily responsible to the public.
d) This is false. An unqualified opinion, despite its negative-sounding name, is the most favorable opinion auditors can express. It means the auditor believes the financial statements are in compliance with GAAP without material qualification, reservation, or exception.
e) This is true. The ultimate responsibility for financial statements rests with the executives of the reporting company.