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Which of the following statements is INCORRECT with respect to basic principles issued by SA 200 that govern the auditor's responsibilities whenever an audit is carried out?

Which of the following statements is INCORRECT with respect to basic principles issued by SA 200 that govern the auditor's responsibilities whenever an audit is carried out? Correct Answer The auditor should not obtain knowledge about the client's business to determine the nature, timing and the extent of the audit procedures.

The incorrect statement is The auditor should not obtain knowledge about the client's business to determine the nature, timing and the extent of the audit procedures.

Key PointsAuditor: An auditor is an authorised person who verifies and reviews the financial records and financial statements of a company and ensures that they are prepared in accordance with the norms. He also checks whether any tampering or manipulation has been done with the financial data with the aim of hiding any fraud or malpractice within the company. 

Important Points

  •  All the documents on which the auditor works can be used as an evidence in case of proving that a fraud has been done or manipulation of financial data has been performed. So, Option 2 is contextually correct.
  • The financial data of a company has an immense importance in its existence. Since, auditor has to verify and review the financial data, he might come to know secrets of a company that might cause a lot of harm to the company if disclosed to anybody outside the company. So, an auditor shall not disclose this financial information with anybody without the proper consent of the management. So, Option 3 is also contextually correct.
  • An auditor is expected to render his auditing service with due honesty and sincerity, as his deliberately made false report may tarnish the goodwill of the company. The stake of goodwill of the company lies on the auditor's shoulder, so his honesty and sincerity is utmost important. So, Option 4 is also contextually correct.
  • Since, an auditor may be an outside person, so he might not have full knowledge about the company. So to start with the auditing work, he has to gather all the information related to company he can to determine the nature, timing and the extent of the audit procedures. Hence, Option 1 is contextually incorrect.

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