The auditor has a right to-
|a) Obtain information and explanation|
b) Obtain information and explanation from the employees and officers
c) Obtain information and explanation necessary for the purpose of audit
d) Both (b) and (c)
The Correct Answer Is:
d) Both (b) and (c)
The correct answer is (d) Both (b) and (c). This means that the auditor has the right to obtain information and explanations not only from the employees and officers of the audited entity but also any other information and explanations necessary for the purpose of the audit.
Let’s delve into the details of why this answer is correct and why the other options are not.
Why the Correct Answer is (d) Both (b) and (c):
The rights of an auditor are essential to ensure the effectiveness and thoroughness of an audit. Here’s why option (d) is correct:
(b) Obtain information and explanation from the employees and officers:
This right allows auditors to directly interact with the employees and officers of the audited entity. It’s crucial because these individuals are usually the ones responsible for day-to-day financial transactions and operations.
By obtaining information and explanations from them, auditors can gain valuable insights into the company’s financial processes, ensuring accuracy and compliance.
(c) Obtain information and explanation necessary for the purpose of the audit:
This is a fundamental right that ensures auditors have access to any information and explanations they deem necessary to conduct a thorough audit. This may include a wide range of documents such as financial records, contracts, invoices, bank statements, and other relevant materials.
This right is essential to guarantee that auditors can verify the accuracy of financial statements and assess the overall financial health of the audited entity.
In combination, these rights (b) and (c) ensure that auditors have the authority not only to interview key personnel but also to access all pertinent documentation and information required for a comprehensive audit.
This comprehensive access is vital for auditors to perform their duties effectively and provide accurate assessments of the audited entity’s financial position.
Why the Other Answers Are Not Correct:
a. Obtain information and explanation:
While this option correctly acknowledges the auditor’s right to obtain information and explanations, it is not comprehensive enough to cover the full scope of an auditor’s rights. It does not specify who the information can be obtained from or the extent of the information required.
As such, it falls short of providing a complete understanding of the auditor’s authority during the audit process.
b. Obtain information and explanation from the employees and officers:
This option is partially correct as auditors do have the right to obtain information from employees and officers. However, it does not cover the broader spectrum of information and explanations that may be necessary for an audit, such as documents and records.
c. Obtain information and explanation necessary for the purpose of the audit:
This option is almost complete but lacks the specificity of who the auditor can obtain this information from. While it acknowledges the importance of obtaining necessary information, it doesn’t mention the role of employees and officers in providing this information.
In summary, the correct answer (d) encompasses both (b) and (c), providing a comprehensive perspective on the rights of auditors during the audit process.
Auditors need to have the authority to access information and explanations not only from employees and officers but also from any other relevant sources to ensure a thorough and accurate audit.