The auditor must be aware of management's motivations to present financial information in a certain light when leases are utilized.

Question

Quizplus · Accepted Answer

This is true because management may have certain incentives, such as meeting earnings targets, to structure their lease agreements in a way that would make the financial statements appear more favorable. The auditor needs to be aware of these motivations and exercise professional skepticism in assessing the accounting treatment of leases.

The Auditor Must Be Aware of Management's Motivations to Present