Question

AS 1301 specifies that _______.

1) critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee
2) significant and immaterial accounting policies and practices and critical accounting estimates must be communicated to the audit committee
3) the auditor should bill audit clients at distinct phases of the audit process
4) auditors should always consult with their own legal counsel before issuing an unmodified opinion

Answer 1

AS 1301 requires auditors to communicate critical accounting policies and practices, along with critical accounting estimates, to the audit committee. This ensures transparency and informs the committee about important financial statement aspects and significant estimates.

Step-by-step explanation:

AS 1301 specifies that critical accounting policies and practices and critical accounting estimates must be communicated to the audit committee. This standard emphasizes the importance of clear communication between auditors and the audit committee regarding key aspects of the company's accounting practices.

It is part of the auditor's responsibility to inform the committee about policies and practices that are foundational to the financial statements, as well as estimates that could significantly affect the company's financial status.