Please answer question to the best of your abillities need correct answer becaus
ID: 2506250 • Letter: P
Question
Please answer question to the best of your abillities need correct answer because I am studying for midterm all the help will be grateful.
Decision Case 1-7 Responsibility for Financial Statements and the Role of the Auditor Financial statements arc the means by which accountants communicate to external users. Recent financial reporting scandals have focused attention on the accounting profession and its role in the preparation of these statements and the audits performed on the statements. Required Who is responsible for die preparation of the financial statements that arc included in a company's annual report? Who performs an audit of the financial statements referred to in part (1)? Why is it important for those who arc responsible for an audit of die financial statements to be independent of those who prepare the statements? Explain your answer.Explanation / Answer
1) The financial statements are prepared by the accountants of the Company. These financial statements contain all the information about the financial transactions that have occurred in that financial year.
2) The financial statements audit is done by the external auditors. They are not related to the Company. Generally a person who is totally new to the organisation performs the udit.
3) It is important that the suditor of the financial statements of the company should be an outsider and independent of those who prepare the statements as this will prevent an kind of bias. If a oerson who is related to the Company performs the audit then there are chances that the Company may be able to hide any misdoings or fraud within the Company. Audit by an outsider who has no relations to the company will ensure transperency. This will be good for the shareholders of the Company.