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

Which one of the following statements best describes the responsibilities of the directors and the external auditor in relation to a company's financial statements?

The directors are responsible for preparing the financial statements, while the external auditor independently examines them and expresses an opinion on whether they give a true and fair view. Reversing these roles would remove the auditor's independence, so preparation stays with the directors and the opinion with the auditor.

  1. AThe directors prepare the financial statements and the auditor gives an independent opinion on whether they give a true and fair viewCorrect
  2. BThe auditor prepares the financial statements and the directors give an opinion on whether they give a true and fair view
  3. CThe directors and the auditor jointly prepare the financial statements and share responsibility for any errors in them
  4. DThe shareholders prepare the financial statements and the auditor gives the directors an opinion on them

Explanation

Directors are responsible for preparing financial statements and maintaining adequate accounting records and internal control. The external auditor's role is to express an independent opinion on whether the statements give a true and fair view (or are presented fairly) in accordance with the applicable framework. The second option reverses the roles, which would destroy auditor independence.

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