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CMA Intermediate · Corporate Accounting and Auditing · Nature, Scope, Objectives and Significance of Auditing

According to the standard on overall objectives of the independent auditor (SA 200), the primary objective of an audit of financial statements is to:

The primary objective of an audit under SA 200 is to enhance the confidence of intended users in the financial statements. The auditor does this by expressing an opinion on whether they are prepared, in all material respects, under the applicable framework. It provides reasonable assurance, not a guarantee.

  1. AEnhance the degree of confidence of intended users in the financial statementsCorrect
  2. BGuarantee that the entity's financial statements are free from all misstatements
  3. CDetect every fraud committed by the management
  4. DCertify that the entity is financially sound and will continue forever

Explanation

SA 200 states that the purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is achieved by the auditor's opinion on whether they are prepared, in all material respects, in accordance with an applicable financial reporting framework. An audit gives reasonable, not absolute, assurance, so the guarantee option is wrong.

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