If internal control is effective, the auditor may confine his work to a representative number of transactions and avoid detailed verification.

Question

Which of the following are the duties of an auditor?
(A) To measure business events in terms of profit and loss and communicate the financial conditions of the business
(B) To prepare a balance sheet representing a true and fair picture of the financial position of the business
(C) To prepare final accounts, computation of taxable income, etc., while acting as an accountant
(D) To report whether the profit and loss account represents a true and fair picture of the profit or loss

Answer 1

Effective internal controls, like automated systems and segregated duties, enhance financial reporting reliability. They reduce errors and fraud, enabling auditors to utilize sampling instead of exhaustive reviews. For example, robust cash transaction controls permit auditors to test the controls and verify a sample of transactions, not every entry. This approach conserves time and resources while ensuring accurate audit outcomes.

Firm 2	Cooperate	Compete
Firm 1	5, 5	0, 10
Compete	10,0	2, 2

If internal control is effective, the auditor may confine his work to a representative number of transactions and avoid detailed verification.

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The Correct Option is A

Solution and Explanation

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