Question 1 (6 marks)

Your neighbor invited you to lunch yesterday.Sure enough, it was no "free lunch" because he wanted to discuss the annual report of Monster Inc. He owns Monster Inc. shares and has just received the report.He says, "Angels LLP, a global public accounting firm, prepared the audited financial statements and gave an unqualified opinion, so my investment must be safe." He also noted that since the auditors always test all of the controls at the company, he is confident, no one in upper management will ever try and play any tricks with the numbers.

Required:

Identify three misconceptions does your neighbour seems to have about the auditor's role with respect to Monster Inc. Provide a response for each misconception.