The Auditing Standards Describe How an Auditor Determines If the Preconditions

question 65

Multiple Choice

The auditing standards describe how an auditor determines if the preconditions for an audit are present.Which of the following would be a precondition for an audit?

• A)The auditor obtains the agreement of management that it acknowledges and understands its responsibility for the issuing of the financial statements in accordance with the financial reporting framework.
• B)The auditor obtains the agreement from management that it acknowledges and understands its responsibility for internal controls so financial statements can be prepared free of material misstatement.
• C)The auditor obtains the agreement of management that it will provide the auditor with all information that management is aware of that might be relevant to the preparation of the financial statements and any other information the auditor may request.
• D)The auditor determines whether the financial reporting framework (the set of internal control standards)used by the client to prepare the financial statements is acceptable.

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Definitions:

Stability Strategy

A business strategy focused on maintaining the current state of operations and avoiding risk by seeking steady growth or consistent performance.

Merger

Two organizations combine resources and become one.

Turnaround

The process of implementing significant changes in a company to reverse poor performance and return to profitability.

Liquidation

The termination of a business and the sale of its assets.