CH.3 - Management Responsibility/Auditors Responsibility

Question 1

Management is Responsibility

Answer 1

1. F/S - the entity’s F/S (and tax returns) and the selection and application of accounting policies
2. I/C - establishing and maintaining effective internal control over financial reporting
3. Laws - identifying and ensuring that the entity complies with the laws and regulations applicable to its activities, and preventing/detecting fraud.
4. Making all financial records and related information available to the auditor
5. Providing the auditor with a letter, at the conclusion of the engagement, that confirms certain representation made during the audit
6. adjusting the financial statements to correct material misstatements identified by the auditor
7. Affirming to the auditor in the representation letter that the effects of any uncorrected misstatements are immaterial (both individually and in the aggregate) to the financial statements
   taken as a whole.

Question 2

Auditors Responsibilities

Answer 2

The auditors is responsible for conducting the audit in accordance with generally accepted auditing standards (GAAS) which require

Question 3

Auditors Responsible

Answer 3

• obtain reasonable assurance (rather than absolute assurance) about whether the financial statements are free of material misstatement, whether by error or fraud.

Question 4

Auditors Responsible

Answer 4

• obtains an understanding of entity and its environment, including its internal control, sufficient to assess risk and to design appropriate auditing procedures.

Question 5

Limitation of the Engagement

Answer 5

• an audit is not designed to detect an error or fraud that is immaterial to the financial statements
• an audit is not designed to provide assurance on internal control, or to identify significant deficiencies.
• if discovered report to audit committee

Question 6

Other Matters

Answer 6

• Audit is subject to inherent risks that errors and fraud will not be detected
• arrangements involving the conduct of the engagements, such as timing, client assistance and the availability of documents.

Question 7

ISA 210 States

Answer 7

if the auditor is unable to agree to a change of the engagement from an audit to a lower level of service and is not permitted to continue the original engagement, the auditor should withdraw and consider whether there is any obligation to report to other parties such as the board of directors and shareholders.