Inherent Limitations of an Audit
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Questions and Answers

What aspect of financial reporting contributes to the inherent limitations of an audit?

  • Decrease in relevance of information over time
  • Future events affecting an entity
  • Judgment by management (correct)
  • Nature of audit procedures

    • What is a key reason why an audit is not an official investigation into alleged wrongdoing?

  • Nature of audit procedures
  • Timeliness of financial reporting
  • Inherent limitations on obtaining evidence (correct)
  • Future events affecting an entity

    • Which factor tends to diminish the relevance and value of information over time?

  • Fraud involving sophisticated schemes
  • Decrease in relevance over time (correct)
  • Future events affecting an entity
  • Balance between reliability and cost

    • In the context of auditing, what does 'engagement' refer to?

    <p>Arrangement between auditor and client</p> Signup and view all the answers

    Why is it important for an auditor to strike a balance between the reliability of information and its cost?

    <p>Timeliness of financial reporting</p> Signup and view all the answers

    What may seriously affect an entity's ability to continue its business according to the text?

    <p>Future events or conditions</p> Signup and view all the answers

    What is one of the learning outcomes associated with studying this chapter?

    <p>Understanding the nature and scope of audit</p> Signup and view all the answers

    Which of the following is NOT a part of the objectives of audit as mentioned in the text?

    <p>Providing investment advice</p> Signup and view all the answers

    What is NOT mentioned as an inherent limitation of audit in the text?

    <p>Regulatory compliance</p> Signup and view all the answers

    What is the main difference between reasonable assurance engagement and limited assurance engagement?

    <p>The level of assurance provided to stakeholders</p> Signup and view all the answers

    In the context of auditing, what do engagement standards primarily focus on?

    <p>Establishing guidelines for conducting audits</p> Signup and view all the answers

    What is the basic purpose of assurance engagements in auditing?

    <p>To enhance the credibility of information being reported</p> Signup and view all the answers

    What is the primary difference between absolute assurance and reasonable assurance?

    <p>Absolute assurance is impractical in audits, while reasonable assurance can be achieved through proper audit procedures.</p> Signup and view all the answers

    In an assurance engagement, what is the main purpose of the practitioner expressing a conclusion?

    <p>To enhance the confidence of intended users about the subject matter.</p> Signup and view all the answers

    When comparing a limited assurance engagement to a reasonable assurance engagement, what is true about their levels of assurance?

    <p>Limited assurance engagement provides a lower level of assurance than reasonable assurance engagement.</p> Signup and view all the answers

    What are the inherent limitations of an audit according to the text?

    <p>Nature of financial reporting and nature of audit procedures.</p> Signup and view all the answers

    Which element is NOT part of an assurance engagement as mentioned in the text?

    <p>Confirmation from the responsible party.</p> Signup and view all the answers

    How does an auditor's competence relate to the duties expected from them?

    <p>Auditors are only expected to perform duties within their scope of competence.</p> Signup and view all the answers

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