Question

Which of the following best expresses the understanding of the terms of the engagement that exist between the client and the CPA firm?

A) Management asserts there are no errors, material or immaterial, in the general ledger.
B) Auditors assert that the primary audit goal is audit efficiency.
C) Auditors assert that their primary responsibility is to plan and perform the audit in order to provide reasonable assurance as to the detection of material misstatement due to error or fraud.
D) Management asserts that they will provide the auditor with a risk assessment as to material misstatements due to errors or fraud in the company's financial statements.

Answer 1

The correct understanding of the engagement terms between the client and a CPA firm is that auditors aim to provide reasonable assurance about the detection of material misstatements, which is expressed in option C.

Step-by-step explanation:

The understanding of the terms of the engagement between the client and the CPA firm is best expressed by option C) Auditors assert that their primary responsibility is to plan and perform the audit in order to provide reasonable assurance as to the detection of material misstatement due to error or fraud. This statement correctly identifies the auditor's obligation under generally accepted auditing standards (GAAS) to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.

Option A is incorrect because it's the management's responsibility to ensure that there are no errors in the general ledger, not an assertion made by the auditors. Option B is incorrect because the primary audit goal is not efficiency but rather the fair presentation of financial statements. And option D is incorrect as it describes management's responsibility to provide their own risk assessment, which is not typically how the engagement terms with the CPA firm are expressed.