Please choose the right answer and write why you choose option A or B and why you did not choose the opposite in about 70 to 100 words. You have to answer the light blue coloured question. For your reference, I have included one question at the beginning showing model answers of what to write or what not to write.

Which of the following statements relating to auditing is most correct? A. The objective of an audit is to provide a high but not absolute assurance that the financial statements are free of material misstatement. B. When performing an audit, the auditor must assume that client management are lying until such time as they are able to establish the truth in what they say. The correct answer is A. Provided below are some possible (but not exhaustive) responses attempting to explain why A is the correct answer, together with some comments. Response Comment Auditors do not assume that the client is lying. As answer B is Mark: 0 incorrect answer A must be correct. The response must explain why the answer is correct, not why the alternate answer is incorrect. Auditors are not required to achieve an absolute level of assurance. Mark: 0 Auditing provides reasonable assurance which means high, but not While the statements made are factually correct, they are all absolute. Auditors do not need to find all material misstatements in rewording of the response in a different way. The answer does an audit. Audit risk must be reduced to a low level but does not not demonstrate why the statement in the response is correct. have to be zero. The aim of an audit is to add credibility to the underlying financial Mark: 0 statements and this is achieved by providing the highest level of While the statement is factually correct, the explanation does assurance that is possible. not address why, if the aim is to provide the highest level of assurance that is possible, the objective would not be to provide an absolute level of assurance. Due to the inherent limitations of an audit, and the level of judgment Mark: 1 and forward looking estimates that underly the preparation of the Demonstrates an understanding of why the statement financial statements on which the auditor is providing assurance, the expressed in the response correct. That is why is the objective auditor cannot certify with 100% certainty that the financial of an audit to provide a high but not absolute level of assurance. statements are free of material misstatement. A high level of assurance that approaches, but does not reach, an absolute level of assurance, is the best that the auditor can hope for. Provided below are some possible (but not exhaustive) responses attempting to explain why B is the incorrect answer, together with some comments. Response Auditors cannot provide an absolute level of assurance, so response A is correct. Response B is, therefore, incorrect The auditor does not need to assume that management are lying until such time as they establish the truth in what they are saying. Comment Mark: 0 The response must refer to why the answer is incorrect, not why the alternate answer is correct. Mark: 0 Explanation simply rephrases the incorrect response so that what the auditor must do becomes what the auditor must not do. There is no demonstration of knowledge of why the auditor does not assume that management are always lying. Mark: 0 Explanation discusses what the auditor needs to do, without reference to why the approach expressed in the response is wrong. Mark 1 Demonstrates an understanding of why the statement is incorrect. That is, why the auditor shouldn't assume, in the first instance, that management are lying. Auditors are required to exercise professional scepticism when conducting the audit. Professional scepticism involves a questioning mind, to trust but verify, which is not the same as assuming that management are always lying. While auditors do not unquestioningly believe everything that management tells them and, depending on the auditor's understanding of the entity and it's environment, the auditor may initially doubt some statements more than others, to approach every statement made by management assuming that it is a lie would mean that the conduct of an audit would be impossible. Which of the following conclusions drawn by the auditor is most valid? A. Although the sample deviation rate, upon completion of the tests of controls, was found to be higher than the tolerable deviation rate, none of the deviations resulted in a misstatement in the financial report assertion. The auditor, therefore, concludes that the control activity can be relied on. B. The control activity that the auditor was planning to rely on was found, upon completion of the tests of controls, to be ineffective and there are no compensating controls that the auditor can identify or wishes to test. The auditor, therefore, plans to achieve a lower level of detection risk than originally anticipated