CHAPTER 2 - CHAPTER 2 2-5 The three categories of...

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CHAPTER 2 2-5 The three categories of management assertions cover every aspect of what is needed for a transaction to be handled properly, for a financial statement account to be fairly stated, and for the financial statements to be presented appropriately and to contain adequate disclosures. The management assertions form the basis for planning and evaluating the evidence that the auditor must obtain about the fairness of the client’s financial statements. They help the auditor ensure that “all the bases are covered” in the process of collecting and evaluating evidence to form an opinion on the fairness of the financial statements. 2-8 Management is responsible to prepare financial statements that fairly present the company’s financial condition and operations in accordance with established accounting standards. Note that the auditor’s opinion explicitly states that the financial statements are the responsibility of management. The auditor is responsible to issue an opinion in regards to the financial statements prepared by management. In order to issue this opinion, the auditor must plan and perform the audit in accordance with established standards to obtain reasonable assurance that the financial statements are free of material misstatement, whether caused by error or fraud. However, it is important to note that an auditor’s unqualified opinion does not mean that errors or fraud do not exist but rather that there is reasonable assurance that they do not exist in material amounts. 2-24 Brief Description of Generally Accepted Auditing Standards Sally Jones' Actions Resulting in Failure to Comply with Generally Accepted Auditing Standards General Standards : 1. The auditor must have adequate technical training and proficiency to perform the audit. 1.
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CHAPTER 2 - CHAPTER 2 2-5 The three categories of...

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