Case Study:

ABC Audit Firm was engaged to conduct an audit of XYZ Company's financial statements for the fiscal year ended December $31,20$XX$.$ During the audit process, the audit team identified several significant findings related to internal control weaknesses, potential misstatements, and non$-$compliance with accounting standards.

Upon completion of the audit fieldwork, the audit team presented its findings to XYZ Company's management during an exit meeting. The management team expressed gratitude for the thoroughness of the audit and requested additional clarification on certain audit findings.

Subsequently, XYZ Company's management prepared a formal written response to address the audit findings identified by the audit team. The management response included detailed explanations, corrective actions, and planned improvements to address the issues raised during the audit.

For instance, one of the audit findings related to inadequate segregation of duties in the finance department. In response, XYZ Company's management outlined plans to implement additional controls, reassign responsibilities, and provide additional training to staff members to strengthen internal controls and mitigate the risk of fraud or error.

Additionally, XYZ Company's management addressed potential misstatements identified during the audit by conducting further analyses, reconciliations, and adjustments to ensure the accuracy of the financial statements. They also committed to enhancing their monitoring and review processes to prevent similar issues from recurring in the future.

After reviewing XYZ Company's management response, the audit team performed follow$-$up procedures to evaluate the effectiveness of the corrective actions and improvements implemented by management. These procedures included retesting control activities, reviewing supporting documentation, and assessing the overall impact on the financial statements.

Based on the management's response and the results of the follow$-$up procedures, the audit team concluded that XYZ Company's management had taken appropriate and effective measures to address the audit findings identified during the audit engagement.

Objective Question:

Which of the following best describes the role of XYZ Company's management in response to the audit findings?

A$)$ Ignoring the audit findings and refusing to take any corrective actions.

B$)$ Acknowledging the audit findings and providing detailed explanations and corrective actions.

C$)$ Concealing the audit findings to avoid negative consequences.

D$)$ Blaming the audit team for the findings and disputing their accuracy.