The following statements relate to general principles or terms used in the audit of financial statements. Identify two errors from each of the following statements (a)-(e) and explain briefly why these are errors or suggest corrections.

(a) The objective of an audit of financial statements is to enable auditors to give a true and correct view in all respects in accordance with Hong Kong Auditing Standards.

(b) Fraud refers to an unintentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage. The primary responsibility for the prevention and detection of fraud rests with the auditors.

(c) Audit report – limitation in the scope of auditors’ work

When there has been a limitation in the scope of the auditors’ work that prevents them from obtaining sufficient evidence to express an unmodified opinion, the auditors should issue a modified (except for disagreement) opinion when the effect of the limitation is not so material or pervasive as to require a disclaimer, and the wording of the opinion should indicate that it is qualified as to the possible adjustments to the audit fee that might have been determined to be necessary had the limitation not existed.

(d) When auditing accounts receivable, the auditor should obtain evidence to check the management assertion of cut-off to ensure the accounts receivable balance is 100% correct.

(e) Audit working papers are the property of the audit client and they can be used as a substitute for the company’s accounting records in case the accounting records are destroyed.

Answer rating: 100% (QA)

Solution a The objective of an audit of financial statements is to enable auditors to give a true and fair view in all respects in accordance with IFA... View the full answer