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Assignment Sample Solution of Audit

Question 1: What are the primary objectives of an external audit?

Question 2: What is the difference between internal and external audits?

Question 3: Explain the concept of materiality in auditing.

 

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Audit Assignment Sample

Q1:

Answer :

Q.1 Ans. The primary objective of an external audit is to provide an independent opinion on the fairness and accuracy of an organization’s financial statements. This includes ensuring compliance with relevant accounting standards, laws, and regulations. External audits also aim to detect material misstatements, whether due to error or fraud, and to enhance the credibility of financial reports for stakeholders such as investors, creditors, and regulatory authorities. By offering transparency, external audits help build trust in the organization’s financial integrity and ensure accountability in its operations.

Q1:

Answer :

Q.2 Ans.

Internal audits are conducted by an organization’s internal audit team to assess and improve the efficiency of internal controls, risk management, and governance processes. They are primarily focused on operational improvements and are not mandatory by law. External audits, on the other hand, are performed by independent auditors to verify the accuracy of financial statements and ensure compliance with regulations. The primary goal of external audits is to provide assurance to external stakeholders, while internal audits serve the interests of the organization’s management.

Q1:

Answer :

Q.3 Ans.

Materiality in auditing refers to the significance of an error, omission, or misstatement in financial statements that could influence the economic decisions of users. Auditors use materiality as a threshold to determine the level of detail and focus during an audit. Factors influencing materiality include the size of the organization, the nature of the transaction, and its impact on stakeholders. For example, a small error might be immaterial for a large corporation but significant for a smaller entity. Materiality ensures that auditors prioritize issues that matter most to users of financial statements.