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IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

Which statement about the auditor's responsibilities compared with the directors' responsibilities for a company's accounts is correct?

Directors are responsible for preparing financial statements that give a true and fair view and for internal controls, while the auditor independently expresses an opinion on them. The auditor does not prepare the accounts, prevent all fraud or guarantee the company's future solvency.

  1. AThe auditor is responsible for preparing the financial statements and the directors for auditing them
  2. BThe auditor is responsible for preventing and detecting all fraud in the company
  3. CThe directors are responsible for preparing financial statements that give a true and fair view, while the auditor expresses an opinion on themCorrect
  4. DThe directors are responsible for expressing an opinion on whether the auditor has complied with auditing standards
  5. The auditor guarantees the future solvency of the company by signing the report

Explanation

Management and directors prepare the statements and maintain internal controls. The auditor forms and expresses an independent opinion based on audit evidence. The auditor does not prepare the accounts, is not responsible for all fraud prevention, and does not guarantee solvency.

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