ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs
Which statement about the external auditor's report on a company's financial statements is correct?
The auditor expresses an opinion on whether the financial statements are prepared, in all material respects, in line with the applicable financial reporting framework. This provides reasonable, not absolute, assurance. Preparing the statements and choosing accounting policies remain the responsibility of the directors.
- AThe auditor guarantees that the financial statements are completely free from error
- BThe auditor expresses an opinion on whether the financial statements are prepared in all material respects in accordance with the applicable reporting frameworkCorrect
- CThe auditor is responsible for preparing the financial statements and the directors review them
- DThe auditor decides which accounting policies the company will adopt
Explanation
The auditor gives an opinion, with reasonable but not absolute assurance, on whether the statements are prepared in all material respects under the framework. Option A is wrong because audits give reasonable, not absolute, assurance; preparation and policy choice are management's responsibilities.
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