Hey Chegg, I need help with one specific question. I know that in the second par
ID: 2462200 • Letter: H
Question
Hey Chegg, I need help with one specific question. I know that in the second paragraph of the audit report, it says that Ernst & Young audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the last sentence of the second paragraph ends with in conformity with U.S. generally accepted accounting principles. But I can't figure whether the 1st or the 3rd choice is the correct answer. Can you help me with that and also explain why the choice you picked is the correct answer. Thank you.
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Apple Inc.
We have audited the accompanying consolidated balance sheets of Apple Inc. as of September
29, 2012 and September 24, 2011, and the related consolidated statements of operations,
shareholders’ equity and cash flows for each of the three years in the period ended September
29, 2012. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Apple Inc. at September 29, 2012 and September 24,
2011, and the consolidated results of its operations and its cash flows for each of the three
years in the period ended September 29, 2012, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Apple Inc.’s internal control over financial reporting as of
September 29, 2012, based on criteria established in Internal Control—Integrated Framework
issued by the committee of Sponsoring Organizations of the Treadway Commission and our
report dated October 31, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
San Jose, California
October 31, 2012
b. What steps do auditors take to determine whether a company's financial statements are free from material misstatement?
Auditors assess the company's system of internal controls ensure the information was prepared in accordance to GAAP. Additionally, auditors examine, on a test basis, evidence supporting the financial statement amounts and disclosures.
Auditors assess the company's system of internal controls ensure the information was prepared in accordance to GAAP. Additionally, auditors examine each transaction that comprises the financial statement amounts and disclosures.
Auditors assess the company's system of internal controls ensure the information was prepared in accordance to the SEC. Additionally, auditors examine, on a test basis, evidence supporting the financial statement amounts and disclosures.
Auditors assess the company's system of internal controls ensure the information was prepared in accordance to SEC. Additionally, auditors examine each transaction that comprises the financial statement amounts and disclosures.
Explanation / Answer
I would go with the first one i.e. Auditors assess the company's system of internal controls ensure the information was prepared in accordance to GAAP. Additionally, auditors examine, on a test basis, evidence supporting the financial statement amounts and disclosures.The explaination is as follows:
An independent fi nancial statement audit is conducted by a registered public accounting fi rm. It includes examining, on a test basis, evidence supporting the amounts and disclosures in the company’s fi nancial statements, an assessment of the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation to form an opinion on whether the fi nancial statements taken as a whole are free of material misstatement. The independent auditor’s overarching goal is to provide fi nancial statement users with reasonable—but not absolute—assurance that the fi nancial statements prepared by management are fairly presented. To communicate that assurance, the independent auditor provides a report that includes an opinion about whether the company’s fi nancial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles (GAAP).