Which of the Following Statements Best Describes Auditors' Responsibility to Detect

question 48

Multiple Choice

Which of the following statements best describes auditors' responsibility to detect errors and frauds?

• A)Auditors should design an audit to provide reasonable assurance of detecting errors and frauds that are material to the financial statements.
• B)Auditors are responsible to detect material errors, but have no responsibility to detect material frauds that are concealed through employee collusion or management override of the internal control structure.
• C)Auditors have no responsibility to detect errors and frauds unless analytical procedures or tests of transactions identify conditions causing a reasonably prudent auditor to suspect that the financial statements were materially misstated.
• D)Auditors have no responsibility to detect errors and frauds because an auditor is not an insurer and an audit does not constitute a guarantee.

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Definitions:

Administrative Costs

Overhead expenses associated with the day-to-day running of a business, involving clerical activities, and support services not linked directly to production.

Service Department Expenses

Costs incurred by the departments that support the primary activities of a business but do not directly engage in production.

Operating Departments

Operating departments refer to the divisions within a company directly involved in its core business activities and operations.

Maintenance Expenses

Costs incurred to keep property, equipment, or assets in efficient operating condition, not improving but merely maintaining them.