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IAI Actuarial Core Principles · Business Finance · Regulation of financial reporting of incorporated entities

Which statement best describes the primary purpose of the statutory audit of a company's financial statements?

The statutory audit exists to give an independent opinion on whether the financial statements show a true and fair view under the applicable reporting framework. It does not guarantee solvency, uncover every fraud, or replace the directors' duty to prepare the accounts.

  1. ATo guarantee that the company will remain solvent for the next year
  2. BTo provide an independent opinion on whether the financial statements give a true and fair view in line with the applicable frameworkCorrect
  3. CTo detect every fraud committed by employees during the year
  4. DTo prepare the financial statements on behalf of the directors
  5. To certify that the company's strategy is sound

Explanation

An audit gives an independent opinion on whether the financial statements present a true and fair view under the reporting framework. It is not a guarantee of solvency, does not ensure all fraud is found, and preparation remains the directors' responsibility.

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