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
An auditor is concerned with the balance sheet as of a particular date, such at 12/31. Sometimes events occur or become know subsequent to the balance sheet date and before
What is the rationale for accounting for (nonexpendable) endowment funds on the full, rather than a modified, accrual basis? Why is it important that depreciation be charged
When a business sells its accounts receivable to a financial institution, is it called, line of credit,cash equivalent, factoring, or market to market?
Described below are certain transactions of Edwardson Corporation. The company uses the periodic inventory system. On February 2, the corporation purchased goods from Martin C
A solid set of accounting standards is also part of an economy's infrastructure. Investors don't want to put up capital unless there's a system that communicates financial r
Holmes Institute HA3032 Memo 02 - Semester 01, 2014. Mr David Buttoneer the owner operator of Buttons by David Pty Ltd. runs a number of button lines. His favourite is a cut
Discuss the responsibility of an auditor to uncover fraud perpetrated by its management client. Describe at least three mitigation risk strategies to satisfy this responsibi
Identify the unresolved problems which need to be addressed and discuss why each is a problem for the auditor and the potential impact of each on the financial statements.