Question

The auditor’s judgment concerning the overall fairness of presentation of financial position, results of operations, and changes in cash flow is applied within the framework of:

a. quality control.
b. generally accepted auditing standards which include the concept of materiality.
c. the auditor’s evaluation of the audited company’s internal control.
d. generally accepted accounting principles

Answer 1

The auditor's judgement on the fairness of financial statements is primarily based on generally accepted accounting principles (GAAP), backed by generally accepted auditing standards which incorporate materiality and consideration of the company's internal controls.

Step-by-step explanation:

The auditor's judgement regarding the fairness of presentation of financial statements is primarily guided within the framework of generally accepted accounting principles (GAAP). When auditors evaluate the financial statements of a company, they use GAAP as a benchmark to ensure that the company's financial position, results of operations, and changes in cash flow are accurately depicted. Generally accepted auditing standards, which include the concept of materiality, also influence the auditor's evaluation, alongside the auditor's evaluation of the company's internal controls. However, it's GAAP that provides the overarching guidelines for the preparation and presentation of financial statements, ensuring consistency and comparability across different organizations.