ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs
Which of the following statements about the respective responsibilities of directors and auditors is correct?
Directors stay responsible for the financial statements, while the auditor gives reasonable but not absolute assurance on them. The audit does not transfer responsibility, and the auditor neither keeps the records nor guarantees there are no misstatements.
- AThe auditor's work removes the directors' responsibility for the financial statements
- BThe directors are responsible for the financial statements, and the auditor's opinion provides reasonable, not absolute, assurance about themCorrect
- CThe auditor must prepare the accounting records if the directors fail to maintain them
- DThe auditor provides absolute assurance that no misstatement exists
Explanation
Directors remain responsible for the financial statements even when audited. The audit gives reasonable assurance because of inherent limitations such as sampling and judgement. Absolute assurance is not given, and the auditor does not take over preparing the accounting records.
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