Exercise 3 The following three statements are representative of attitudes and op
ID: 2588435 • Letter: E
Question
Exercise 3 The following three statements are representative of attitudes and opinions sometimes encountered by CPAs in their professional practices. Evaluate each of the statements and indicate [1] Areas of agreement with the statement, if any, and [2] Areas of misconception, incompleteness, or fallacious reasoning included in the statement, if any. Place your answer in the box provided Today's audit consists of testing only selected transactions. This is dangerous because testing depends upon the auditar's judgment, which may be defective An audit can be relied upon only if every transaction is verified 1. 2. An audit by a CPA is essentially negative and contributes to neither the gross national product nor the general well-being of society. The auditor does not create but merely checks what someone else has done One should rad the footndtes to financial statements, even though they are aften preented in technical language and are incomprehensible The auditor may reduce exposure to third-party liability by stating sonething in the footnotes that contradicts completely what has been presented in the halance shet ar income stat ement. 3.Explanation / Answer
1. The auditor need not verfify each & every transaction. He can very well rely on the system of internal control followed in the company being audited.Sample testing of the internal control findings will throw light on the efficiency & reliability of the system--which the auditor can use as the starting point for his probe.Satisfying himself about the efficacy of the existing internal control system,in not allowing errors of commission & omission ---or sample-testing of adequate volume of transactions --as the size & nature of the company demands or dictates--- should be more than sufficient 2..This is both a mis-conception& fallacious reasoning.The word audit itself means verification and it is generalyy done to report to somebody about the fairness & accuracy of the financial and connected subjective details over the period covered by the audit. Auditor's opinion are heavily relied upon, by all users of a company's records, without any exception---such as existing shareholders,potential investors, banks & other lenders, vendors,contractors & customers, employees & government authorities for collecting their dues. Auditors' attestation is very important , without which all the financial details compiled by a company ,however true they may be, will not be considered authentic & public. Business ventures are responsible for the advent of various financila figures ,as part of their process --on the way providing employment opportunities to hundreds of people & thus helping in the upliftment of society as well as contributing to the revenues of teh federal & loacl governments. & auditors check,counter-check,verify & attest to the fairness of presentation of data & certify as both true & fair--only afterwhich ,the financial figures become officially accepted documents ,fit for submission ,wherever required. Hence, the importance of audit & auditors. 3… It has to be agreed that the user must read the footnotes to the financial statements.But that does not absolve the company & the auditor who certified the statements & the accompanying notes ,of any responsibility ,for the matters contained there-in. ie. The auditor is not only responsible for the balance sheet & income statement figures ,but also for every of piece of information ,in the published financial report,unless otherwise ,specifically exempts himself of some figures or statements--- which he can do by qualifying the same.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.