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CA Intermediate · Auditing and Ethics · Nature, Objective and Scope of Audit

Sundaram Textiles Ltd's management argues that because the statutory auditor has audited the financial statements, the company's directors are relieved of responsibility for preparing them. Under SA 200 and the Companies Act, 2013, which response is correct?

Management and those charged with governance remain responsible for preparing and fairly presenting the financial statements. The auditor's responsibility is limited to expressing an opinion on them. An audit, an unmodified opinion or suggested adjustments do not shift preparation responsibility to the auditor.

  1. APreparation of the financial statements remains the responsibility of management and those charged with governance; the auditor only expresses an opinion on themCorrect
  2. BThe auditor becomes jointly responsible for preparing the financial statements once the audit is accepted
  3. CDirectors are relieved of responsibility if the auditor gives an unmodified opinion
  4. DResponsibility for preparation shifts to the auditor when the auditor suggests adjusting entries

Explanation

The auditor's role is to express an opinion on the financial statements. Preparation and fair presentation remain the responsibility of management and those charged with governance, including the Board's responsibility statement. Suggesting adjustments or giving an unmodified opinion does not transfer that responsibility.

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