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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 examining the financial statements prepared by the company to ensure accurac... show full transcript
Worked Solution & Example Answer:Explain the role of the independent auditor - NSC Accounting - Question 3 - 2016 - Paper 1
Step 1
Explain the role of the independent auditor.
Answer
The independent auditor examines the financial statements to ensure their accuracy and compliance with accounting standards. They assess various aspects of the company's financial health, providing assurance to stakeholders by issuing an opinion on the financial statements' reliability.
Step 2
Did Gunuz Ltd receive a qualified, unqualified or a disclaimer audit report? Explain your choice.
Answer
Gunuz Ltd received a qualified audit report as indicated by the auditor's opinion which states that financial statements fairly represent the company's financial position except for the marketing expense that could not be verified. This suggests that there is a limitation in the audit scope, characteristic of a qualified report.
Step 3
Identify TWO consequences for the auditor if she agreed to this request.
Answer
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Reputational Damage: Agreeing to the CEO's request may damage the auditor's reputation for integrity and independence, leading to a loss of trust from stakeholders.
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Legal Liabilities: The auditor could face legal consequences for not adhering to professional standards, risking potential lawsuits if issues arise from the financial statements.