Question

Which of the following statements is most correct regarding the audit opinion?

1) The audit opinion is not a reflection of how management is performing.
2) The audit opinion predicts the future success of the company.
3) The audit opinion certifies the absolute accuracy of the financial statements.
4) The audit opinion reports whether the financial statements are fairly presented in accordance with auditing standards.

Answer 1

The most correct statement about the audit opinion is that it reports whether the financial statements are fairly presented in accordance with auditing standards (option 4), and it does not predict company success, reflect management performance, or guarantee absolute accuracy.

Step-by-step explanation:

The subject of this question is the nature and purpose of the audit opinion in the context of financial statements and auditing standards. The answer to the student's question is that the most correct statement regarding the audit opinion is the fourth one: The audit opinion reports whether the financial statements are fairly presented in accordance with auditing standards.

An audit opinion is provided by an independent auditor and communicates the auditor's evaluation of the truthfulness and fairness of a company’s financial statements. The audit opinion does not reflect on management performance, predict future success, or certify absolute accuracy. It serves as a reasonable assurance that the financial statements are free from material misstatement, be it from fraud or error, thus helping users of financial statements make informed decisions.

Note that an audit opinion is not a guarantee of future performance or management effectiveness, and it does not ensure that there are no mistakes at all in the financial statements, but rather that no substantial errors were found that would mislead the users of those statements.