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

Which of the following statements about the external auditor of a listed company is correct?

The external auditor gives an independent opinion on whether the financial statements give a true and fair view in all material respects. The auditor does not prepare them, does not guarantee fraud is absent, and reports to the shareholders rather than the directors.

  1. AThe auditor expresses an opinion on whether the financial statements give a true and fair view in all material respectsCorrect
  2. BThe auditor is responsible for preparing the financial statements and the directors review them
  3. CThe auditor guarantees that no fraud has occurred in the company during the year
  4. DThe auditor is appointed by the directors and reports to the directors only

Explanation

The auditor gives an independent opinion on whether the financial statements are fairly presented in all material respects. Preparation is the directors' duty. An audit gives reasonable, not absolute, assurance, so it does not guarantee that fraud is absent. Auditors report to shareholders, who normally appoint them.

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