Final answer:
The party responsible for the preparation of financial statements as stated in the audit report is Management. They ensure the accuracy and completeness of financial statements. The auditor's role is to audit these statements to provide assurance they are free of material misstatements.
Step-by-step explanation:
In the audit report, the auditor details the responsibilities of various parties in relation to the financial statements. According to auditing standards, it is clearly stated that the preparation of financial statements is the responsibility of Management. This includes ensuring that these statements are accurate, complete, and prepared in accordance with the applicable financial reporting framework, whether that is generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS).
Management is also responsible for the internal controls within the organization, which includes safeguarding of its assets and prevention and detection of fraud. Auditors, on the other hand, are responsible for conducting the audit in accordance with auditing standards to provide reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The internal auditor's role usually involves evaluating and improving the effectiveness of risk management, control, and governance processes, the client's legal counsel may be involved in matters that require legal interpretation, and the Securities and Exchange Commission (SEC) is a regulatory body that oversees securities exchanges, securities brokers and dealers, and securities transactions. However, neither of these parties is primarily responsible for preparing the financial statements.