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

Which of the following is correct about the auditor's responsibility for detecting errors and fraud in a financial statement audit?

The auditor's responsibility is to obtain reasonable assurance that the financial statements as a whole are free from material misstatement, whether caused by fraud or error. Preventing and detecting fraud primarily rests with management, and an audit cannot give absolute assurance.

  1. AThe auditor is responsible for preventing all frauds in the company
  2. BThe auditor must certify that the company has no fraud or error of any kind
  3. CThe auditor obtains reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or errorCorrect
  4. DThe auditor is responsible only for errors and has no responsibility regarding fraud

Explanation

The auditor plans and performs the audit to obtain reasonable assurance about material misstatement from fraud or error. Prevention of fraud rests with management and those charged with governance. Because of inherent limitations, absolute assurance is not possible.

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