Question

The auditors primary purpose in auditing the client's system of internal control over financial reporting is?

1) to prevent fraudulent financial statements from being issued to the public.
2) to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements.
3) to report to management that the internal controls are effective in preventing misstatements from appearing on the financial statements.
4) to efficiently conduct the Audit of Financial Statements.

Answer 1

The primary purpose of auditors in auditing the client's system of internal control over financial reporting is to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements.The correct option is 2.

Step-by-step explanation:

The primary purpose of auditors in auditing the client's system of internal control over financial reporting is to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements. This means that auditors assess whether the internal controls in place are designed and operating effectively to prevent and detect material misstatements in the financial statements.

For example, auditors review the company's processes and procedures for recording financial transactions, safeguarding of assets, and ensuring the accuracy and completeness of financial information. They test these controls by selecting samples of transactions and assessing whether the controls identified and corrected any errors or discrepancies. If auditors find weaknesses in the internal controls during their assessment, it could increase the risk of material misstatements in the financial statements and prompt them to make recommendations for improvement.

Therefore, option 2) to evaluate the effectiveness of the company's internal controls over all relevant assertions in the financial statements is the correct answer to the question.