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ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance

Which of the following statements about directors' responsibilities for financial statements is correct?

Directors are responsible for preparing financial statements that give a true and fair view and for keeping adequate accounting records and internal controls. The external auditor is independent and only expresses an opinion on those statements. Preparation cannot be shifted to the auditor without impairing independence.

  1. ADirectors are responsible for preparing financial statements that give a true and fair view, and the auditor expresses an opinion on themCorrect
  2. BThe external auditor is responsible for preparing the financial statements, and directors review the audit opinion
  3. CDirectors are responsible for the audit opinion, while shareholders prepare the financial statements
  4. DDirectors are responsible only for the statement of profit or loss, while the auditor prepares the statement of financial position

Explanation

Directors prepare the financial statements and maintain adequate accounting records and internal control; the auditor independently gives an opinion. The distractor reversing these roles is wrong because auditors cannot prepare what they must independently audit, and responsibility is not split by statement.

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