Advantages & Limitations of Audit
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Questions and Answers

What is one of the advantages of audited accounts?

  • They provide low quality information
  • They create uncertainty for shareholders
  • They encourage employees to commit fraud
  • They give confidence to users about the information's quality (correct)

    • Who benefits from the safeguarding of financial interests by audited accounts?

  • Employees
  • Owners of the company (shareholders) (correct)
  • Government authorities
  • Creditors

    • What do audited statements help government authorities with?

  • Settling liability for taxes (correct)
  • Detecting fraud
  • Safeguarding financial interests
  • Encouraging embezzlement

    • What type of evidence is obtained by an auditor for an Assurance Engagement?

    <p>&quot;Sufficient&quot; in quantity and &quot;Appropriate&quot; in quality</p> Signup and view all the answers

    What is one of the elements of an Assurance Engagement?

    <p>All information to be examined by the practitioner</p> Signup and view all the answers

    What do auditors review when detecting fraud or error?

    <p>Existence &amp; operations of various controls operating in the entity</p> Signup and view all the answers

    What are some inherent limitations of audit as discussed in the text?

    <p>Future events may affect an entity adversely.</p> Signup and view all the answers

    What is the nature of financial reporting that poses a challenge to audit?

    <p>It involves subjective decisions by management.</p> Signup and view all the answers

    How does a review engagement differ from an audit engagement?

    <p>Review provides a lower level of assurance than audit.</p> Signup and view all the answers

    Why may auditors face challenges in obtaining complete information during an audit?

    <p>Practical and legal limitations exist on the ability to obtain complete information.</p> Signup and view all the answers

    Why is maintaining a balance between benefit and cost difficult in the context of financial statements?

    <p>Balance between benefit and cost becomes challenging due to fixed deadlines and cost considerations.</p> Signup and view all the answers

    What do auditors not have absolute assurance about in terms of financial statements?

    <p>The absence of material misstatements due to frauds or errors.</p> Signup and view all the answers

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