Manchester Company is a publicly held corporation that manufactures a line of home appliances. The comments below were included in Manchester’s 20X2 annual report to its shareholders:

The integrity of the financial information reported by Manchester Company is the responsibility of Manchester’s management. Fulfilling this responsibility requires the preparation of financial statements in accordance with applicable Accounting Standards.
Manchester uses an established system of accounting and internal controls in gathering and processing financial data. Management believes that internal control is sufficiently maintained by the established business policies and procedures and the ongoing review of operations by Manchester’s internal audit department.
Dobson & Yost, an independent auditing firm, is engaged to issue an opinion on the financial statements of Manchester Company. The opinion is based upon the firm’s audit of Manchester’s financial statements in accordance with Auditing Standards. The audit committee of Manchester’s board of directors reviews the audit report submitted by the external auditing firm, including the audited financial statements. The external auditing firm has full and free access to the audit committee.

Required

(a) Judgement and estimates are necessary in the application of Accounting Standards.
Whose judgement and estimates are reflected in the financial statements of Manchester Company? Explain your answer.

(b) Explain who is responsible for the establishment and maintenance of Manchester Company’s:
— accounting system;
— internal controls.

(c) Explain the extent of the audit of Manchester’s financial statements in accordance with Auditing Standards by the external auditors, Dobson & Yost.

(d) Assume that the external auditors, Dobson & Yost, have issued an unqualified opinion on Manchester’s financial statements. What inferences, if any, can be made from the opinion of Dobson & Yost about the:
— soundness of the decisions made by the management of Manchester Company?
— financial statements of Manchester Company?