Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

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How are management's and auditor's responsibilities represented in the auditor's report for a nonissuer?

Explicitly VS. Explicitly.
Implicitly VS. Explicitly.
Implicitly VS. Implicitly.
Explicitly VS. Implicitly.

The correct answer is: Explicitly VS. Explicitly.

In the auditor's report for a nonissuer, the responsibilities of management and the auditor are articulated in a clear manner, which is crucial for conveying the distinct roles each party plays in the financial reporting and auditing process. Management is tasked with preparing the financial statements and ensuring their fairness and accuracy, and this responsibility is explicitly stated. The report clearly outlines that management has the responsibility for the preparation and presentation of the financial statements in accordance with the applicable financial reporting framework. Conversely, the auditor's responsibilities are also explicitly stated in the report. The auditor indicates their role in conducting the audit and providing an opinion on whether the financial statements are free from material misstatement, whether due to fraud or error. This distinction highlights the independent and evaluative role of the auditor, which underscores the objectivity and integrity of the audit process. The clarity in the auditor's report serves to inform users of the financial statements about who is accountable for what, enhancing transparency and understanding of the audit's nature and scope.