a.
Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.
To explain: The objective of external auditing and failure of Person F to achieve the objective.
B.
Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.
To explain: The requirement of independent audit in financial statements.
C.
Introduction: The financial statements indicate the financial performance of a company. It discloses the
To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.
D.
Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.
To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.
E.
Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.
To explain: The facts in this case related to each of the driver of audit quality.
F.
Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.
To state: The Person F & B agreed to conduct the audit in first place.
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Chapter 1 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
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