It is management's responsibility to select the accounting policies that are used in the preparation of the financial statements. What is the auditor's responsibility with respect to these accounting policies?
A) approve the accounting policies that are used, so that an opinion can be stated on the fairness of the financial statements
B) evaluate the appropriateness of the accounting policies that are used and of the associated estimates made
C) tell management which accounting policies should be selected so that accurate estimates can be made for year-end adjustments
D) recalculate the estimates that are used for the accounting policies (such as bad debt allowance and warranty expenses)

Question

Quizplus · Accepted Answer

The auditor's responsibility is to evaluate the appropriateness of the accounting policies chosen by management and the associated estimates made. The auditor should ensure that the financial statements reflect the economic substance of the transactions and events being reported and are in accordance with the relevant financial reporting framework. The auditor may also make recommendations to management for more appropriate accounting policies or estimates, but ultimately it is management's responsibility to select the policies used.

It Is Management's Responsibility to Select the Accounting Policies That