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
Objectives:  understanding planning stage of the audit process:  review of client business and perform audit risk analysis(applicable textbook chapters 4, 5 and 6)
Would your answer to b) change if Edge had written to the auditors telling them that they intended to buy NFD and were relying on the audited financial statements to assist
The North Carolina Furniture Company (NCFC) manufactures upholstered furniture, which it sells to various small retailers in the Northeast and Midwest on credit terms of 2/1
Find the effective rate of both. Which is lowest? If Marine Bank eliminates its compenstating balance requirement, would the answer change? What would the new effective rate
Select the component of audit risk(a,b,c and d - below) that is most directly illustrated. The components may be used once, more than once, or not at all.
Who are the potential stakeholders involved in situation and what alternatives does Fred have in this situation? What might the company do to prevent this situation from occur
Income tax liability. Fisher's tax attorney informed you that it is possible that the client will have to pay $875,000 in taxes regarding a tax dispute that started four yea
Whats a true and fair view is it the same as everything being correct in my financial statement and is it correct that you as an auditor should be responsible for the preventi