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In May 2015, the Firm of Chang and Crown (C&C)

question 11

Essay

In May 2015, the firm of Chang and Crown (C&C) became the auditors of Laua Limited (LL) for the fiscal year ended December 31, 2014. LL's shareholders and Board approved the change from its previous audit firm on the recommendation of LL's senior management. One of the new board members is a bit confused about management's role with respect to the financial statements and thought that Chang and Crown would be preparing the financial statements. He was also glad that the auditors would be able to help prevent illegal acts and fraud.
Required:
A) Distinguish between management's responsibility and the auditor's responsibility for the financial statements under audit.
B) Explain to the board member why the auditor does NOT help prevent illegal acts and fraud. What is the role of the auditor with respect to illegal acts and fraud?

Definitions:

Buyers Store

A retail or online establishment where consumers purchase goods, often referring specifically to the entity in the context of a supply chain or distribution channel.

Usage of Trade

Established practices and patterns of behavior commonly observed and accepted in a particular industry.

Growers Mart

A marketplace or exchange platform dedicated to the sale and purchase of agricultural products directly from farmers.

Fresh Farm LLC

A company likely involved in agriculture, specifically in producing and possibly selling fresh farm products.