An Auditor Is Required to Establish an Understanding with a Client

question 54

Multiple Choice

An auditor is required to establish an understanding with a client regarding the responsibilities for each engagement. This understanding generally includes:

• A)management's responsibility to guarantee that there are no material misstatements due to fraud.
• B)the auditor's responsibility to plan and perform the audit to provide reasonable, but not absolute, assurance of detecting material errors or fraud.
• C)management's responsibility for providing the auditor with an assessment of the risk of material misstatement due to fraud.
• D)the auditor's responsibility for the fairness of the financial statements.

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Definitions:

Market Economy

An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and not by government intervention.

Investment Project

A project undertaken by individuals, companies, or governments aiming at generating future profits through capital expenditure.

Political Authorities

The individuals or organizations that hold the power to govern or rule over a specific territory or population, making and enforcing laws and policies.

Equity Capital

Funds raised by a company through the sale of common or preferred stock, representing ownership interests in the company.