Jones, CPA, is auditing the financial statements of XYZ Retailing Inc. What assurance does Jones provide that direct effect noncompliance that is material to XYZ's financial statements, and noncompliance that has a material, but indirect effect on the financial statements will be detected?
A)Direct effect noncompliance: Reasonable; Indirect effect noncompliance: None.
B)Direct effect noncompliance: Reasonable; Indirect effect noncompliance: Reasonable.
C)Direct effect noncompliance: Limited; Indirect effect noncompliance: None.
D)Direct effect noncompliance: Limited; Indirect effect noncompliance: Reasonable.

Question

Quizplus · Accepted Answer

Auditors provide reasonable assurance of detecting direct effect noncompliance that is material to the financial statements. However, for noncompliance that has a material but indirect effect on the financial statements, auditors do not provide assurance, as their primary focus is on the financial statements themselves, not on compliance with all laws and regulations.

Jones, CPA, Is Auditing the Financial Statements of XYZ Retailing