Which of the following is a 'Precondition for an Audit' that the auditor must establish with management before accepting the engagement?

Answer options:

Management agrees to provide a written representation letter at the end of the audit.

Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.

Management guarantees that there are no material misstatements.

The auditor assesses the integrity of management as high.

How to approach this question

Preconditions = What management must agree to. 1. Framework. 2. Responsibilities (FS, IC, Access).

Full Answer

B.Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.✓ Correct

Management acknowledges its responsibility for the design, implementation, and maintenance of internal control.

The preconditions for an audit include obtaining the agreement of management that it acknowledges and understands its responsibility for the preparation of the financial statements and for internal control.

Common mistakes

Confusing preconditions with audit procedures.

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