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Basic Question 7 of 13
The audit committee should ensure that external auditors ______
II. are independent of management influence.
III. prepare the financial statements in accordance with generally accepted accounting principles (GAAP).
IV. conduct the audit in accordance with generally accepted auditing standards (GAAS).
I. have authority over the audit of the entire corporate group, including foreign subsidiaries and affiliated companies.
II. are independent of management influence.
III. prepare the financial statements in accordance with generally accepted accounting principles (GAAP).
IV. conduct the audit in accordance with generally accepted auditing standards (GAAS).
User Contributed Comments 7
| User | Comment |
|---|---|
| danlan | They are auditors and not accountants. |
| PhiWong | What about the final sign off of the audit firm say, "In confirmity of GAAP." Part of the audit is financial audit to see if management records assets, liabilities and P&L components according to GAAP's boundaries. |
| ostrich | I think they may not know about LCM if their is a conflict of interest for example. |
| julescruis | Auditors check the financial statements for material misstatements and material misstatements can include divergences with applicable accounting standards. However, they NEVER prepare financial statements as that would affect their independance. They would audit themselves in a way. |
| group | Preparation of financial statements is the responsibility of management and not the auditors. Their responsiblity is simply to audit the financial statements and give their opinion in compliance with the US GAAP. |
| HolzGe1 | at least in theory :) |
| ascruggs92 | Danlan, auditors are accountants, that's why their opinions are trusted when they say financial statements meet GAAP standards. III is wrong only because they do not prepare the statements |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
evaluate the effectiveness of a company's corporate governance policies and practices;
CFA® 2025 Level II Curriculum, Volume 3, Module 17.