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CS Professional · Internal and Forensic Audit · Internal Controls

Under the Guidance Note on Audit of Internal Financial Controls over Financial Reporting, the statutory auditor of Kaveri Textiles Ltd. is planning the audit of internal financial controls (IFC). Which description best matches the auditor's primary responsibility?

The auditor's responsibility is to express an opinion on whether the company has adequate internal financial controls over financial reporting and whether they operated effectively. Designing and maintaining controls remains management's job, and the audit is neither limited to cash nor a guarantee that no fraud occurred.

  1. ATo design and implement the IFC system on behalf of the management
  2. BTo express an opinion on the adequacy and operating effectiveness of the company's IFC over financial reportingCorrect
  3. CTo certify that no fraud has occurred during the year
  4. DTo test only the controls that relate to cash and bank transactions

Explanation

The auditor reports on whether the company has an adequate IFC system over financial reporting and whether it operated effectively. Designing and implementing controls is management's responsibility, so option A is wrong. The audit is not limited to cash, and it is not a fraud certification.

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