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Explain the role of the independent auditor - NSC Accounting - Question 3 - 2016 - Paper 1
Question 3
Explain the role of the independent auditor. The independent auditor is responsible for conducting an audit of the financial statements of a company to ensure they ... show full transcript
Worked Solution & Example Answer:Explain the role of the independent auditor - NSC Accounting - Question 3 - 2016 - Paper 1
Step 1
2.1 Explain the role of the independent auditor.
Answer
The independent auditor is responsible for conducting an audit of the financial statements of a company to ensure they are presented fairly and in accordance with applicable accounting standards. This involves examining financial records and documentation to verify accuracy and compliance, providing an unbiased opinion on the financial health of the organization. This opinion adds credibility to the financial statements, reassuring stakeholders about the integrity of the information presented.
Step 2
2.2 Did Gunuz Ltd receive a qualified, unqualified or a disclaimer audit report? Explain your choice.
Answer
Gunuz Ltd received a qualified audit report. A qualified report indicates that, aside from the specific issue noted regarding the marketing expense in the Income Statement, the financial statements are fairly presented. This highlights that there was a concern related to one aspect of the statements, but it does not imply that the overall financial health is misrepresented.
Step 3
2.3 Provide TWO consequences for the auditor if she agreed to this request.
Answer
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Reputational Risk: If the auditor agrees to alter the financial statements against professional ethics, this could damage their reputation in the industry, leading to a loss of credibility and potential loss of clients.
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Legal Consequences: Agreeing to such requests could expose the auditor to legal liabilities, including potential lawsuits for professional misconduct or negligence, as they may be seen as complicit in any inaccuracies in the financial reporting.