ACCA Advanced Audit and Assurance (AAA) Practice Exam

Who is included in the three-party relationship that involves auditors?

1. The user, the auditor, and the responsible party

2. The auditor, the management, and the regulatory body

3. The user, the management, and external stakeholders

4. The auditor, the responsible party, and the internal auditor

The correct answer is: The user, the auditor, and the responsible party

The three-party relationship that involves auditors comprises the user, the auditor, and the responsible party. This relationship is fundamental in the context of auditing because it highlights the roles and responsibilities of each party involved. The user is typically the individual or entity that relies on the financial statements or audit report, such as investors, creditors, or regulators. They depend on the information provided by auditors to make informed decisions. The auditor's role is to independently assess and express an opinion on the financial statements, ensuring their accuracy and fairness. The responsible party, usually the management or those charged with governance, is accountable for preparing the financial statements and ensuring they are free from material misstatement. This trio establishes a framework where the auditor provides assurance to the users regarding the reliability of the representations made by the responsible party. Understanding this relationship is crucial for appreciating the role of auditors in enhancing the credibility of financial reporting and fostering trust among stakeholders.