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CA Intermediate · Auditing and Ethics · Nature, Objective and Scope of Audit

While auditing Mahadev Foods Ltd, the auditor notes that management's responsibility statement is absent from the draft engagement letter. A junior argues that since the auditor expresses the opinion, the auditor is primarily responsible for preparing the financial statements. What is the correct position?

Management and those charged with governance are responsible for preparing and fairly presenting the financial statements, including internal control. The auditor's role is only to form and express an opinion on them. Responsibility is not shared equally and does not pass to the auditor.

  1. AThe auditor is responsible for preparing the financial statements and the opinion on them is a formality
  2. BPreparation and fair presentation of the financial statements is the responsibility of management and those charged with governance; the auditor's responsibility is to express an opinion on themCorrect
  3. CResponsibility is shared equally between management and the auditor
  4. DThe auditor is responsible for preparing them only if the company has no accountant

Explanation

Under SA 200 and the Companies Act, the Board prepares the financial statements and the auditor forms and expresses an opinion. The audit does not shift or share preparation responsibility, and auditor involvement in drafting does not change this.

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