Benefits and limitations of audit
Course:- Auditing
Reference No.:- EM1354503

Assignment Help
Assignment Help >> Auditing

A fellow business student questions the benefits of an audit as follows:

"Why should a company hire auditors? As far as I can tell auditors of public companies charge millions of dollars in audit fees, and it is not clear to me that management receives any benefit for this expenditure. It is just money down the drain. It is also not clear to me that auditors accomplish anything. We have seen a number of material restatements of financial statements. Why should a company pay for audits that are ineffective? I think auditors are just a drain on society."

a. Explain the economic benefits provided by a financial statement audit.

b. Explain the inherent limitations that might prevent auditors from finding every potential material misstatement in financial statements.

Ask Question & Get Answers from Experts
Browse some more (Auditing) Materials
Evaluate the following quotation: "If a CPA firm completes a nonpublic company audit of Adam Company's financial statements following AICPA generally accepted auditing stand
Explain the purposes and reasons for public accounting firms to perform an integrated audit. Address the Sarbanes-Oxley Act (SOX) and explain corporate governance and its re
Find characteristics that distinguish NFP from business enterprises and issues relevant to NFP financial reporting and describe your rationale by reference to existing reporti
Many companies have an internal audit staff to assess the adequacy of internal controls. Do you think your organization has an internal audit function? Or do you think your
Compute price and usage variances for direct materials, compute the direct labor rate and labor efficiency variances and compute the fixed overhead spending and volume varianc
Why is there greater risk for an individual accounting worker than there was before? Why is the primary objective of an audit is to add credibility to management's financial s
Which one of the following is the service in which the CPA firm issues a written communication that expresses a conclusion about the reliability of a written assertion that
A revised or final acceptable level of detection risk is determined for each assertion after (1) assessing inherent risk, (2) performing analytical procedures in audit plann