Deck 9: The Role of the Outside Auditor

Question 1

Because auditors assess the internal controls of the organization, audited financial statements signify that fraud within the organization is not a concern. Explain your answer.

Answer 1

False
Although internal controls are assessed as part of the audit process, not all frauds are likely to be caught by the auditor.

Question 2

The detection of fraud and embezzlement is the primary purpose of audits. Explain your answer.

Answer 2

False
Audits are intended to determine if the financial statements provide a fair representation of the financial status of the organization, focusing on financial statement accuracy, internal controls, and adherence to GAAP.

Question 3

Describe the process an outside auditor uses to analyze an organization's transactions to ensure accuracy.

Answer 3

Auditors use statistical sampling to check transactions and the records linked with these transactions. Auditors can expand the sample if significant errors are found; doing so can expand the reliability of the conclusions drawn.

Question 4

Describe and discuss a reason for audit failure.

Question 5

A(n) ___ opinion means that the auditor believes the financial statements are a fair representation of the organization's financial status

Question 6

a(n) ___ opinion means there are major areas of concern

Question 7

a(n) ___ opinion means that the financial statements are not presented in accordance with GAAP.