Which of the following is a difference between audits and compilations?
A) The auditor's objective is to obtain reasonable assurance that the financial statements are free of material misstatements, whereas the objective of a compilation is to assist management in presenting financial information without obtaining any level of assurance.
B) Audits do not require an understanding of the entity's internal controls and an assessment of fraud risk, whereas compilations require an understanding of the entity's internal controls and an assessment of fraud risk.
C) Audits have a narrower scope as compared to reviews, whereas compilations have a broader scope as compared to reviews.
D) Audits provide a reasonable level of assurance to the users of the financial statements, whereas compilations provide a limited level of assurance to the users of the financial statements.

Question

Quizplus · Accepted Answer

The main difference between audits and compilations is the level of assurance provided. In an audit, the objective is to obtain reasonable assurance that the financial statements are free from material misstatements, whereas in a compilation, the objective is to assist management in presenting financial information without obtaining any level of assurance. Audits involve a more extensive examination of the financial statements and the underlying accounting records, whereas compilations do not involve any substantive testing of transactions or balances. Additionally, audits require an understanding of the entity's internal controls and an assessment of fraud risk, whereas compilations do not require this level of detail.

Which of the Following Is a Difference Between Audits and Compilations