CMA Intermediate · Corporate Accounting and Auditing · Nature, Scope, Objectives and Significance of Auditing
Which of the following is an inherent limitation of an audit that persists even when the auditor plans and performs the work carefully?
An audit provides only reasonable assurance, not a guarantee of absolute accuracy. Inherent limitations such as sampling, judgement, estimates and the persuasive nature of evidence remain even with careful planning and execution, so the auditor expresses an opinion on reliability rather than certifying exactness.
- AAuditors express an opinion only on the reliability of the financial statements and do not guarantee absolute accuracyCorrect
- BAuditors are free to choose any auditing standard they prefer
- CAuditors are not required to maintain working papers
- DAuditors must verify every single transaction of the entity
Explanation
An audit gives reasonable, not absolute, assurance because of testing, judgement, internal control limits and persuasive rather than conclusive evidence. The option on verifying every transaction is wrong, as audits are generally based on sampling and tests.
Did you get it right without looking?
One question tells you little. A timed set on Nature, Scope, Objectives and Significance of Auditing shows your real accuracy, how long you take and where you lose marks.
More Nature, Scope, Objectives and Significance of Auditing questions
- Under SA 200, which statement about the auditor's objectives in conducting an audit of financial statements is correct?
- Which statement best describes a limitation arising from the nature of audit evidence?
- Which of the following is a distinction between accounting and auditing?
- Which of the following is correct about the auditor's responsibility for detecting errors and fraud in a financial statement audit?
- Which statement best describes the primary objective of an independent financial statement audit?
- Which statement best describes the nature of auditing as it is understood in the CMA syllabus?