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

What is the basic element of the independent auditor's report regarding audit procedures?

1. The financial statements disclose all required information.

2. The procedures depend on management's judgment.

3. An audit involves performing procedures to obtain audit evidence.

4. The financial statements are consistent with prior periods.

The correct answer is: An audit involves performing procedures to obtain audit evidence.

The correct answer highlights a fundamental aspect of the independent auditor's responsibilities. An audit is fundamentally centered on the performance of procedures designed to obtain audit evidence regarding the financial statements. This process is essential because the auditor must gather sufficient and appropriate evidence to form an opinion on whether the financial statements are free from material misstatement. When auditors conduct their work, they apply various auditing procedures to collect evidence, which may include inspection of documents, observation of assets, inquiries of management, and confirmation with third parties. The nature and extent of these procedures are tailored according to the auditor's assessment of the risks of material misstatement in the financial statements, as well as considering the effectiveness of internal controls. By emphasizing that an audit involves performing specific procedures to gather evidence, this answer underscores the auditors' active role in evaluating both the accuracy of the financial statements and the underlying processes used to prepare them. This evidence is crucial in forming their audit opinion, which is ultimately presented in the independent auditor's report.