A. An auditor may not draft an entity's financial statements based on information from
management's accounting system.
B. The adoption of sound accounting policies is an implicit part of an auditor's responsibilities.
C. An auditor's responsibilities for audited financial statements are confined to the expression of
the auditor's opinion.
D. Making suggestions that are adopted about an entity's internal control environment impairs
an auditor's independence.

Answer(s): C
Explanation:
Choice "c" is correct. An auditor's responsibility is to express an opinion on financial statements
based on an audit.
Choice "a" is incorrect. An auditor may draft an entity's financial statements based on
information from management's financial system. This would be referred to as a compilation
engagement. Choice "b" is incorrect. The adoption of sound accounting policies is an implicit
part of management's responsibilities, not the auditor's responsibilities.
Choice "d" is incorrect. An auditor often makes suggestions that are adopted about an entity's
internal control environment.
QUESTION: 4
Which of the following provides the most authoritative guidance for an auditor?

A. An AICPA audit and accounting guide that provides specific guidance with respect to the
accounting practices in the client's industry.
B. A Journal of Accountancy article discussing implementation of a new standard.
C. General guidance provided by a Statement on Auditing Standards.
D. Specific guidance provided by an interpretation of a Statement on Auditing Standards.

Answer(s): C
Explanation:
Choice "c" is correct. General guidance provided by a Statement on Auditing Standards is the
most authoritative of level of auditing guidance. Auditors are required to comply with SASs, and
should be prepared to justify any departures therefrom. Choices "a" and "d" are incorrect.
AICPA audit and accounting guides and SAS interpretations are interpretive publications that
provide guidance regarding how SASs should be applied in specific situations. They are not as
authoritative as SASs. Choice "b" is incorrect. Journal of Accountancy articles have no
authoritative status but may be helpful to the auditor.
QUESTION: 5
Which of the following accurately depicts the auditor's responsibility with respect to Statements
on Auditing Standards?

A. The auditor is required to follow the guidance provided by the Standards, without exception.
B. The auditor is generally required to follow the guidance provided by Standards with which he
or she is familiar, but will not be held responsible for departing from provisions of which he or
she was unaware.
C. The auditor is generally required to fol ow the guidance provided by the Standards, unless
following such guidance would result in an audit that is not cost-effective.
D. The auditor is generally required to follow the guidance provided by the Standards, and

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