Final answer:
The statement is true; auditors are responsible for designing an audit to obtain reasonable assurance of detecting material misstatements due to fraud or errors. They use various audit techniques to investigate the integrity of financial statements and ensure the accuracy and reliability of the financial information presented.
Step-by-step explanation:
The statement that auditors have a responsibility to design their audit to obtain reasonable assurance of detecting material misstatements in the financial statements due to fraud or errors is true. Auditors must apply professional skepticism and audit techniques to identify any possible misrepresentations in the financial statements that could impact the decisions of users. Similar to researchers who are responsible for verifying proper methods, auditors must also ensure that they are using adequate techniques to detect any significant inaccuracies that could be indicative of fraud or error.
Auditors perform risk assessments to pinpoint where financial statements might be susceptible to misstatement and then tailor their audit procedures accordingly. During an audit, auditors gather sufficient and appropriate evidence to form the basis of their opinion on the financial statements. This involves a variety of techniques such as inquiry, physical inspection, observation, confirmation, and data analytics.
Should an auditor discover irregularities, it is important that they investigate further to determine whether these are due to fraud or error. In doing so, auditors contribute to the integrity of financial reporting, which is crucial for maintaining trust in the financial markets. Their role is akin to a safeguard against misleading information that could potentially harm stakeholders and the economy. To this end, the significance of their work in obtaining reasonable assurance cannot be overstated.