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Q1 There are three different levels of services you could obtain from a certified public accountant. These are referred to as compilation, review, and audit. There are significant differences between the objectives of an audit of financial statements in accordance with generally accepted auditing standards and the objectives of a review in accordance with statements on standards for accounting and review services. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole. A review does not provide a basis for the expression of such an opinion because a review does not contemplate obtaining an understanding of the internal control structure or assess control risk, tests of accounting records and of responses to inquiries by obtaining corroborating evidential matter through inspection, observation or confirmation, and certain other procedures ordinarily performed during an audit. A review may bring to the accountant’s attention significant matters affecting the financial statements, but it does not provide assurance that the accountant will become aware of all significant matters that would be disclosed in an audit. Q2 Auditors decompose these broad assertions into a detailed set of statements referred to as management assertions, separated into three categories: Transactions, Accounts balances, and Presentation and disclosure. Financial statement assertions are the representations of management that are embodied in the financial statements. By approving the financial statements, management are making representations about the information therein. These representations or assertions may be described as: Existence./Rights and obligations/Occurrence/Completeness/Valuation/Measurement/ Presentation and disclosure.
limitations inherent in an audit include inherent limitations. Such limitations are: • Judgments made on behalf of auditors including risk...
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