It is well accepted that, throughout the conduct of the ordinary audit, it is essential to obtain large amounts of information from management and to rely heavily on management’s judgments. After all, the financial statements are management’s representations, and the primary responsibility for their fair presentation rests with management, not the auditor. For example, it is extremely difficult, if not impossible, for the auditor to evaluate the obsolescence of inventory as well as management can in a highly complex business. Similarly, the collectability of accounts receivable and the continued usefulness of machinery and equipment are heavily dependent on management’s willingness to provide truthful responses to questions.
REQUIRED
Reconcile the auditor’s responsibility for discovering material misrepresentations by management with these comments.