When assessing whether the financial statements are auditable, the auditor must consider
A) that the integrity of management and the adequacy of accounting records are the two primary factors determining auditability.
B) that the integrity of management and the adequacy of risk management are the two primary factors determining auditability.
C) that if all of the transaction information is available only in electronic form without a visible audit trail, the company cannot be audited.
D) the control risk before determining if the entity is auditable.

Question

Quizplus · Accepted Answer

The integrity of management and the adequacy of accounting records are the two primary factors determining auditability. This means the auditor must assess whether the management is trustworthy and whether there are proper accounting records in place before deciding if an audit can be conducted. Control risk is considered during the audit planning stage, but it does not determine auditability. Option B is incorrect because risk management is not a primary factor. Option C is incorrect because even if the information is only available in electronic form without a visible audit trail, it may still be audited with the use of electronic audit tools.

When Assessing Whether the Financial Statements Are Auditable, the Auditor