审计学一种整合方法 Auditing& Assurance Services An integrated approach_ Test Bank chapter 9

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审计学：一种整合方法_第12版_英文版Chapter01

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Economic Demand for Auditing
Information risk reflects the possibility that the information upon which the business risk decision was made was inaccurate.
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Learning Objective 3
Explain the importance of auditing in reducing information risk.
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Accumulating Evidence and Evaluating Evidence
Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
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Learning Objective 5
Describe assurance services and distinguish audit services from other assurance and nonassurance services provided by CPAs.

审计学一种整合的方法

statements and internal control
from the auditor’s responsibility
for verifying the financial
statements and effectiveness
of internal control.
PPT文档演模板
审计学一种整合的方法
审计学一种整合的方法
Transaction Flow Example
•Transactions •Sales
•Cash •receipts
•Journals •Sales •journal
•Cash receipts •journal
•Ledgers, •Trial Balance, •and Financial
➢ Material versus immaterial misstatements ➢ Reasonable assurance ➢ Errors versus fraud ➢ Professional skepticism ➢ Fraud resulting from fraudulent financial reporting versus misappropriation of assets
•Sales and •collection
•cycle
•Acquisition •and payment
•cycle
•Payroll and •personnel
•cycle
•Inventory and •warehousing
•cycle
PPT文档演模板
审计学一种整合的方法
Learning Objective 5
•Payroll •journal

审计学-一种整合的方法

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Resolving Ethical Dilemmas
4. Identify the alternatives available to the person who must resolve the dilemma
5. Identify the likely consequence of each alternative
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Special Need for Ethical Conduct in Professions
Our society has attached a special meaning to the term professional. Professionals are expected to conduct themselves at a higher level than most other members of society.
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A Person Chooses to Act Selfishly – Example
Person A finds a briefcase containing important papers and $1,000. He tosses the briefcase and keeps the money.
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审计学：一种整合方法_第12版_英文版Cha(1)

Accumulating Evidence and Evaluating Evidence
Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria.
Determines correspondence
Report on results
Report on tax deficiencies
Established criteria
Internal Revenue Code and all
interpretations
Learning Objective 2
Auditing is determining whether recorded information properly reflects the economic events that occurred during the accounting period.
Learning Objective 3
The final stage in the auditing process is preparing the Audit Report, which is the communication of the auditor’s findings to users.
Audit of a Tax Return Example
Learning Objective 1
Describe auditing.
Nature of Auditing

审计学：一种整合方法_第12版_英文版Chapter05

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
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Business Failure, Audit Failure, and Audit Risk
Audit failure
It occurs when the auditor issues an incorrect audit opinion because it failed to comply with the requirements of auditing standards.
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Legal Terms Affecting CPAs’ Liability
Other terms:
Common law
Statutory law
Joint and several liability
Separate and proportionate liability
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Securities Act of 1933
The Securities Act imposes an unusual burden on the auditor. Section 11 of the 1933 act defines the rights of third parties and auditors.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
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阿伦斯审计学：一种整合方法课后习题答案

Chapter 1The Demand for Audit and Other Assurance Services Review Questions1-1The relationship among audit services, attestation services, and assurance services is reflected in Figure 1-3 on page 13 of the text. An assurance service is an independent professional service to improve the quality of information for decision makers. An attestation service is a form of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party. Audit services are a form of attestation service in which the auditor expresses a written conclusion about the degree of correspondence between information and established criteria.The most common form of audit service is an audit of historical financial statements, in which the auditor expresses a conclusion as to whether the financial statements are presented in conformity with generally accepted accounting principles. An example of an attestation service is a report on the effe ctiveness of an entity’s internal control over financial reporting. There are many possible forms of assurance services, including services related to business performance measurement, health care performance, and information system reliability.1-2 An independent audit is a means of satisfying the need for reliable information on the part of decision makers. Factors of a complex society which contribute to this need are:1.Remoteness of informationa.Owners (stockholders) divorced from managementb.Directors not involved in day-to-day operations ordecisionsc.Dispersion of the business among numerous geographiclocations and complex corporate structures2.Biases and motives of providerrmation will be biased in favor of the providerwhen his or her goals are inconsistent with thedecision maker's goals.3.Voluminous dataa.Possibly millions of transactions processed daily viasophisticated computerized systemsb.Multiple product linesc.Multiple transaction locationsplex exchange transactionsa.New and changing business relationships lead toinnovative accounting and reporting problemsb.Potential impact of transactions not quantifiable,leading to increased disclosures1-3 1. Risk-free interest rate This is approximately the rate the bank could earn by investing in U.S. treasury notes for thesame length of time as the business loan.2.Business risk for the customer This risk reflects thepossibility that the business will not be able to repay itsloan because of economic or business conditions such as arecession, poor management decisions, or unexpectedcompetition in the industry.rmation risk This risk reflects the possibility thatthe information upon which the business risk decision wasmade was inaccurate. A likely cause of the information riskis the possibility of inaccurate financial statements.Auditing has no effect on either the risk-free interest rate or business risk. However, auditing can significantly reduce information risk.1-4The four primary causes of information risk are remoteness of information, biases and motives of the provider, voluminous data, and the existence of complex exchange transactions.The three main ways to reduce information risk are:er verifies the information.er shares the information risk with management.3.Audited financial statements are provided.The advantages and disadvantages of each are as follows:1-5 To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information. Examples of established criteria include generally accepted accounting principles and the Internal Revenue Code. Determining the degree of correspondence between information and established criteria is determining whether a given set of information is in accordance with the established criteria. The information for Jones Company's tax return is the federal tax returns filed by the company. The established criteria are found in the Internal Revenue Code and all interpretations. For the audit of Jones Company's financial statements the information is the financial statements being audited and the established criteria are generally accepted accounting principles.1-6The primary evidence the internal revenue agent will use in the audit of the Jones Company's tax return include all available documentation and other information available in Jones' office or from other sources. For example, when the internal revenue agent audits taxable income, a major source of information will be bank statements, the cash receipts journal and deposit slips. The internal revenue agent is likely to emphasize unrecorded receipts and revenues. For expenses, major sources of evidence are likely to be cancelled checks, vendors' invoices and other supporting documentation.1-7This apparent paradox arises from the distinction between the function of auditing and the function of accounting. The accounting function is the recording, classifying and summarizing of economic events to provide relevant information to decision makers. The rules of accounting are the criteria used by the auditor for evaluating the presentation of economic events for financial statements and he or she must therefore have an understanding of generally accepted accounting principles (GAAP), as well as auditing standards. The accountant need not, and frequently does not, understand what auditors do, unless he or she is involved in doing audits, or has been trained as an auditor.1-81-9Five examples of specific operational audits that could be conducted by an internal auditor in a manufacturing company are:1.Examine employee time cards and personnel records todetermine if sufficient information is available to maximizethe effective use of personnel.2.Review the processing of sales invoices to determine if itcould be done more efficiently.3.Review the acquisitions of goods, including costs, todetermine if they are being purchased at the lowest possiblecost considering the quality needed.4.Review and evaluate the efficiency of the manufacturingprocess.5.Review the processing of cash receipts to determine if theyare deposited as quickly as possible.1-10 When using a strategic systems auditing approach in an audit of historical financial statements, an auditor must have a thorough understanding of the client and its environment. This knowledge should include the client’s regulatory and operating environment, business strategies and processes, and measurement indicators. The strategic systems approach is also useful in other assurance or consulting engagements. For example, an auditor who is performing an assurance service on information technology would need to understand the client’s business strategies and processes related to information technology, including such things as purchases and sales via the Internet. Similarly, a practitioner performing a consulting engagement to evaluate the efficiency and effectiveness of a cli ent’s manufacturing process would likely start with an analysis of various measurement indicators, including ratio analysis and benchmarking against key competitors.1-11 The major differences in the scope of audit responsibilities are:1.CPAs perform audits in accordance with auditing standards ofpublished financial statements prepared in accordance withgenerally accepted accounting principles.2.GAO auditors perform compliance or operational audits inorder to assure the Congress of the expenditure of publicfunds in accordance with its directives and the law.3.IRS agents perform compliance audits to enforce the federaltax laws as defined by Congress, interpreted by the courts,and regulated by the IRS.4.Internal auditors perform compliance or operational auditsin order to assure management or the board of directors thatcontrols and policies are properly and consistentlydeveloped, applied and evaluated.1-12 The four parts of the Uniform CPA Examination are: Auditing and Attestation, Financial Accounting and Reporting, Regulation, and Business Environment and Concepts.1-13 It is important for CPAs to be knowledgeable about e-commerce technologies because more of their clients are rapidly expanding their use of e-commerce. Examples of commonly used e-commerce technologiesinclude purchases and sales of goods through the Internet, automatic inventory reordering via direct connection to inventory suppliers, and online banking. CPAs who perform audits or provide other assurance services about information generated with these technologies need a basic knowledge and understanding of information technology and e-commerce in order to identify and respond to risks in the financial and other information generated by these technologies.Multiple Choice Questions From CPA Examinations1-14 a. (3) b. (2) c. (2) d. (3)1-15 a. (2) b. (3) c. (4) d. (3)Discussion Questions And Problems1-16 a. The relationship among audit services, attestation services and assurance services is reflected in Figure 1-3 on page 13of the text. Audit services are a form of attestationservice, and attestation services are a form of assuranceservice. In a diagram, audit services are located within theattestation service area, and attestation services arelocated within the assurance service area.b. 1. (1) Audit of historical financial statements2.(2) An attestation service other than an auditservice; or(3) An assurance service that is not an attestationservice (WebTrust developed from the AICPASpecial Committee on Assurance Services, but theservice meets the criteria for an attestationservice.)3.(2) An attestation service other than an auditservice4.(2) An attestation service other than an auditservice5.(2) An attestation service other than an auditservice6.(2) An attestation service that is not an auditservice (Review services are a form ofattestation, but are performed according toStatements on Standards for Accounting andReview Services.)7.(2) An attestation service other than an auditservice8.(2) An attestation service other than an auditservice9.(3) An assurance service that is not an attestationservice1-17 a. The interest rate for the loan that requires a review report is lower than the loan that did not require a review becauseof lower information risk. A review report provides moderateassurance to financial statement users, which lowersinformation risk. An audit report provides further assuranceand lower information risk. As a result of reducedinformation risk, the interest rate is lowest for the loanwith the audit report.b.Given these circumstances, Vial-tek should select the loanfrom City First Bank that requires an annual audit. In thissituation, the additional cost of the audit is less than thereduction in interest due to lower information risk. Thefollowing is the calculation of total costs for each loan:1-17 (continued)c. Vial-tek may desire to have an audit because of the manyother positive benefits that an audit provides. The auditwill provide Vial-tek’s management with assurance aboutannual financial information used for decision-makingpurposes. The audit may detect errors or fraud, and providemanagement with information about the effectiveness ofcontrols. In addition, the audit may result inrecommendations to management that will improve efficiencyor effectiveness.d. Under a strategic systems audit approach, the auditor musthave a thorough understanding of the client and itsenvironment, including the client’s e-commerce technologies,industry, regulatory and operating environment, suppliers,customers, creditors, and business strategies and processes.This thorough analysis helps the auditor identify risksassociated with the client’s strategies that may affectwhether the financial statements are fairly stated. Whenapplying the strategic systems audit approach, the auditoroften discovers ways to help the client improve businessoperations, thereby providing added value to the auditfunction.1-18 a. The services provided by Consumers Union are very similar to assurance services provided by CPA firms. The servicesprovided by Consumers Union and assurance services providedby CPA firms are designed to improve the quality ofinformation for decision makers. CPAs are valued for theirindependence, and the reports provided by Consumers Unionare valued because Consumers Union is independent of theproducts tested.b.The concepts of information risk for the buyer of anautomobile and for the user of financial statements areessentially the same. They are both concerned with theproblem of unreliable information being provided. In thecase of the auditor, the user is concerned about unreliableinformation being provided in the financial statements. Thebuyer of an automobile is likely to be concerned about themanufacturer or dealer providing unreliable information.c.The four causes of information risk are essentially the samefor a buyer of an automobile and a user of financialstatements:(1)Remoteness of information It is difficult for a userto obtain much information about either an automobilemanufacturer or the automobile itself withoutincurring considerable cost. The automobile buyer doeshave the advantage of possibly knowing other users who are satisfied or dissatisfied with a similar automobile.(2)Biases and motives of provider There is a conflictbetween the automobile buyer and the manufacturer. The buyer wants to buy a high quality product at minimum cost whereas the seller wants to maximize the selling price and quantity sold.(3)Voluminous data There is a large amount of availableinformation about automobiles that users might like to have in order to evaluate an automobile. Either that information is not available or too costly to obtain.1-18 (continued)(4)Complex exchange transactions The acquisition of anautomobile is expensive and certainly a complexdecision because of all the components that go intomaking a good automobile and choosing between a largenumber of alternatives.d.The three ways users of financial statements and buyers ofautomobiles reduce information risk are also similar:(1)User verifies information him or herself That can beobtained by driving different automobiles, examiningthe specifications of the automobiles, talking toother users and doing research in various magazines.(2)User shares information risk with management Themanufacturer of a product has a responsibility to meetits warranties and to provide a reasonable product.The buyer of an automobile can return the automobilefor correction of defects. In some cases a refund maybe obtained.(3)Examine the information prepared by Consumer ReportsThis is similar to an audit in the sense thatindependent information is provided by an independentparty. The information provided by Consumer Reports iscomparable to that provided by a CPA firm that auditedfinancial statements.1-19 a. The following parts of the definition of auditing are related to the narrative:(1)Virms is being asked to issue a report aboutqualitative and quantitative information for trucks.The trucks are therefore the information with whichthe auditor is concerned.(2)There are four established criteria which must beevaluated and reported by Virms: existence of thetrucks on the night of June 30, 2005, ownership ofeach truck by Regional Delivery Service, physicalcondition of each truck and fair market value of eachtruck.(3)Susan Virms will accumulate and evaluate four types ofevidence:(a)Count the trucks to determine their existence.(b)Use registrations documents held by Oatley forcomparison to the serial number on each truck todetermine ownership.(c)Examine the trucks to determine each truck'sphysical condition.(d)Examine the blue book to determine the fairmarket value of each truck.(4)Susan Virms, CPA, appears qualified, as a competent,independent person. She is a CPA, and she spends most of her time auditing used automobile and truck dealerships and has extensive specialized knowledge about used trucks that is consistent with the nature of the engagement.1-19(continued)(5)The report results are to include:(a)which of the 35 trucks are parked in Regional'sparking lot the night of June 30.(b)whether all of the trucks are owned by RegionalDelivery Service.(c)the condition of each truck, using establishedguidelines.(d)fair market value of each truck using thecurrent blue book for trucks.b.The only parts of the audit that will be difficult for Virmsare:(1)Evaluating the condition, using the guidelines of poor,good, and excellent. It is highly subjective to do so.If she uses a different criterion than the "bluebook," the fair market value will not be meaningful.Her experience will be essential in using thisguideline.(2)Determining the fair market value, unless it isclearly defined in the blue book for each condition.1-20 a. The major advantages and disadvantages of a career as an IRS agent, CPA, GAO auditor, or an internal auditor are:1-20 (continued)EMPLOYMENT ADVANTAGES DISADVANTAGESINTERNAL AUDITOR 1.Extensive exposure to allsegments of theenterprise with whichemployed.2.Constant exposure to oneindustry presentingopportunity for expertisein that industry.3.Likely to have exposureto compliance, financialand operational auditing.1.Little exposure totaxation and the auditthereof.2.Experience is limited toone enterprise, usuallywithin one or a limitednumber of industries.(b)Other auditing careers that are available are:Auditors within many of the branches of the federalgovernment ., Atomic Energy Commission)Auditors for many state and local government units .,state insurance or bank auditors)1-21 The most likely type of auditor and the type of audit for each of the examples are:EXAMPLE TYPE OF AUDITOR TYPE OF AUDIT1.2.3.4.5.6.7.8.9.10.11.12.IRSGAOInternal auditor or CPACPA or Internal auditorGAOCPAGAOIRSCPAInternal auditor or CPAInternal auditor or CPAGAOComplianceOperationalOperationalFinancial statementsOperationalFinancial statementsFinancial statementsComplianceFinancial statementsComplianceFinancial statementsCompliance1-22 a. The conglomerate should either engage the management advisory services division of a CPA firm or its own internalauditors to conduct the operational audit.b.The auditors will encounter problems in establishingcriteria for evaluating the actual quantitative events andin setting the scope to include all operations in whichsignificant inefficiencies might exist. In writing thereport, the auditors must choose proper wording to statethat no financial audit was performed, that the procedureswere limited in scope and that the results reported do notnecessarily include all the inefficiencies that might exist.1-23 a. The CPA firm for the Internet company described in this problem could address these customer concerns by performinga WebTrust attestation engagement. The WebTrust assuranceservice was created by the profession to respond to thegrowing need for assurance resulting from the growth ofbusiness transacted over the Internet.b.The appropriate WebTrust principle for each of the customerconcerns noted in the problem is as follows:1.Accuracy of product descriptions and adherence tostated return policies: (3) Processing Integrity.2.Credit card and other personal information: (1) OnlinePrivacy and (2) Security.3.Selling information to other companies: (1) OnlinePrivacy and (2) Security.4.System failure: (4) Availability.Internet Problem Solution: Assurance Services1-1 This problem requires students to work with the AICPA assurance services Web site.1.Considering the assurance needs of customers and thecapabilities of CPAs, the Special Committee on AssuranceServices developed business plans for six assurance services.Chapter 1 of the textbook discussed several of theseservices. Go to the service description for the assuranceservice that most interests you (any one of the six). Whatare the major aspects or sections of the associated businessplan ., does the plan address market potential, competition,etc.?)Answer: Each business plan provides background information,describes the service, assesses market potential, discussesissues such as competition and why CPAs should offer theservice, identifies practice tools available and steps thatCPAs must take to begin offering the services.2.The Special Committee's report on Assurance Servicesdiscusses competencies needed by assurance providers todayand in the coming decade. Briefly describe the 5 generalcompetencies needed in the next decade (Hint: See the“About Assurance Services” link. Then follow the“Assurance Services and Academia” link.)Answer:The Committee identified the following five majorimperatives regarding future competencies, each of whichimplies increasing emphasis on the competencies noted:1-1 (continued)Customer focus.Assurance service providers need tounderstand user decision processes and how informationshould enter into those processes. Increased emphasis isneeded on: understanding user needs, communication skills,relationship management, responsiveness and timeliness.Migration to higher value-added information activities. Toprovide more value to client/decision makers and others,assurance service providers need to focus less on activitiesinvolved in the conversion of business events intoinformation ., collecting, classifying, and summarizingactivities) and more on activities involved in thetransformation of information into knowledge ., analyzing,interpreting, and evaluating activities) that effectivelydrives decision processes. This will require: analyticalskills, business advisory skills, business knowledge, modelbuilding (including sensitivity analysis), understanding theclient’s business processes, measurement theory(development of operational definitions of concepts, designof appropriate measurement techniques, etc.).Information technology (IT).Assurance services deal ininformation. Hence, the profound changes occurring ininformation technology will shape virtually all aspects ofassurance services. As information specialists, assuranceservice providers need to embrace information technology inall of its complex dimensions. Embracing IT meansunderstanding how it is transforming all aspects of business.It also means learning how to effectively use newdevelopments in hardware, software, communications, memory,encryption, etc., in everything assurance service providersdo as information specialists, not only in dealing withclients, but also in dealing with each other as individuals,teams, firms, state societies, and national professionalorganizations.Pace of change and complexity. Assurance services will takeplace in an environment of rapid change and increasingcomplexity. Assurance service providers need to investheavily in life-long learning in order to maintain up-to-date knowledge and skills. They will require: intellectualcapability, learning and rejuvenation.Competition.Growth in new assurance services will dependless on franchise/regulation and more on market forces.Assurance service providers need to develop their marketingskills —the ability to see clients’ latent informationand assurance needs and rapidly design and deploy cost-effective services to meet those needs —in order toeffectively compete for market-driven assurance services.Required skills include: marketing and selling,understanding customer needs, designing and deployingeffective solutions.1-1 (continued)(Note: Internet problems address current issues using Internet sources. Because Internet sites are subject to change, Internet problems and solutions are subject to change. Current information on Internet problems is available at。

审计一种整合方法

审计一种整合方法审计是一种对财务会计信息和相关非财务信息进行独立客观的评估和验证的活动。

它通过系统的、有组织的方法，对企业的财务状况、经营成果和财务信息的真实性、准确性和完整性进行核查和检验。

审计旨在提供对企业财务信息的可靠性和合理性的保证，为企业提供准确的财务信息和产生投资者信任。

在本文中，我将详细介绍审计的整合方法。

审计的整合方法是一种将不同审计工具和技术结合起来，以提高审计效率和准确性的方法。

整合方法的目标是通过利用各种审计工具和技术的优势，最大限度地提高审计的效益和质量。

首先，审计的整合方法可以包括使用计算机辅助审计工具和技术。

计算机辅助审计工具可以帮助审计师快速获取和分析大量的财务数据，并进行数据挖掘和模式识别。

这些工具可以有效地减少审计人员的工作量，并提高审计的效率。

此外，计算机辅助审计技术还可以帮助审计师发现潜在的审计风险和错误，并提供相应的建议和改进措施。

其次，审计的整合方法还可以包括使用风险导向的审计方法。

风险导向的审计方法通过将审计资源和重点放在对风险较高的领域进行审计，提高审计的效率和效果。

这种方法可以帮助审计师在有限的时间和资源下，更加全面地评估和验证企业的财务信息和业务活动。

通过对风险进行评估和管理，审计师可以更加有针对性地开展审计工作，并提供更加准确和可靠的审计结论。

此外，审计的整合方法还可以包括使用数据分析和数据挖掘技术。

数据分析和数据挖掘技术可以帮助审计师对大量的财务数据进行分类、排序和分析，从中发现潜在的异常和问题。

通过对数据进行深入挖掘和分析，审计师可以快速识别潜在的审计风险和错误，并提供相应的建议和改进措施。

数据分析和数据挖掘技术可以帮助审计师发现一些隐藏的风险和问题，提高审计的全面性和准确性。

此外，审计的整合方法还可以包括使用审核和监控技术。

审核和监控技术可以帮助审计师对企业的财务信息和业务活动进行实时监控和跟踪。

通过对企业财务信息和业务活动的实时监控和跟踪，审计师可以及时发现潜在的问题和错误，并提供相应的建议和改进措施。

审计学：一种整合方法_第12版_英文版Chapter01-精选文档

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
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Competent, Independent Person
The auditor must be qualified to understand the criteria used and must be competent to know the types and amount of evidence to accumulate to reach the proper conclusion after the evidence has been examined. The competence of the individual performing the audit is of little value if he or she is biased in the accumulation and evaluation of evidence.
The Demand for Audit and Other Assurance Services
Chapter 1
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
1-1
Sarbanes-Oxley Act
The Act established the Public Company Accounting Oversight Board. It also requires auditors to attest to management reports on the effectiveness of internal control over financial reporting.

审计学：一种整合方法(英文版) 第14版参考答案AEB14_SM_CH01_v1

Chapter 1The Demand for Audit and Other Assurance ServicesReview Questions1-1The relationship among audit services, attestation services, and assurance services is reflected in Figure 1-3 on page 12 of the text. An assurance service is an independent professional service to improve the quality of information for decision makers. An attestation service is a form of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party. Audit services are a form of attestation service in which the auditor expresses a written conclusion about the degree of correspondence between information and established criteria.The most common form of audit service is an audit of historical financial statements, in which the auditor expresses a conclusion as to whether the financial statements are presented in accordance with an applicable financial reporting framework such as U.S. GAAP or IFRS. An example of an attestation ser vice is a report on the effectiveness of an entity’s internal control over financial reporting. There are many possible forms of assurance services, including services related to business performance measurement, health care performance, and information system reliability.1-2 An independent audit is a means of satisfying the need for reliable information on the part of decision makers. Factors of a complex society which contribute to this need are:1. Remoteness of informationa. Owners (stockholders) divorced from managementb. Directors not involved in day-to-day operations or decisionsc. Dispersion of the business among numerous geographiclocations and complex corporate structures2. Biases and motives of providera. Information will be biased in favor of the provider when his orher goals are inconsistent with the decision maker's goals.3. Voluminous dataa. Possibly millions of transactions processed daily viasophisticated computerized systemsb. Multiple product linesc. Multiple transaction locations4. Complex exchange transactionsa. New and changing business relationships lead to innovativeaccounting and reporting problemsb. Potential impact of transactions not quantifiable, leading toincreased disclosures1-3 1. Risk-free interest rate This is approximately the rate the bank could earn by investing in U.S. treasury notes for the same length of timeas the business loan.2. Business risk for the customer This risk reflects the possibility thatthe business will not be able to repay its loan because of economicor business conditions such as a recession, poor managementdecisions, or unexpected competition in the industry.3. Information risk This risk reflects the possibility that the informationupon which the business risk decision was made was inaccurate. Alikely cause of the information risk is the possibility of inaccuratefinancial statements.Auditing has no effect on either the risk-free interest rate or business risk. However, auditing can significantly reduce information risk.1-4The four primary causes of information risk are remoteness of information, biases and motives of the provider, voluminous data, and the existence of complex exchange transactions.The three main ways to reduce information risk are:1. User verifies the information.2. User shares the information risk with management.3. Audited financial statements are provided.The advantages and disadvantages of each are as follows:1-5 To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information. Examples of established criteria include generally accepted accounting principles and the Internal Revenue Code. Determining the degree of correspondence between information and established criteria is determining whether a given set of information is in accordance with the established criteria. The information for Jones Company's tax return is the federal tax returns filed by the company. The established criteria are found in the Internal Revenue Code and all interpretations. For the audit of Jones Company's financial statements the information is the financial statements being audited and the established criteria are generally accepted accounting principles.1-6The primary evidence the internal revenue agent will use in the audit of the Jones Company's tax return include all available documentation and other information available in Jones’ office or from other sources. For example, when the internal revenue agent audits taxable income, a major source of information will be bank statements, the cash receipts journal and deposit slips. The internal revenue agent is likely to emphasize unrecorded receipts and revenues. For expenses, major sources of evidence are likely to be cancelled checks and electronic funds transfers, vendors' invoices, and other supporting documentation.1-7This apparent paradox arises from the distinction between the function of auditing and the function of accounting. The accounting function is the recording, classifying and summarizing of economic events to provide relevant information to decision makers. The rules of accounting are the criteria used by the auditor for evaluating the presentation of economic events for financial statements and he or she must therefore have an understanding of accounting standards, as well as auditing standards. The accountant need not, and frequently does not, understand what auditors do, unless he or she is involved in doing audits, or has been trained as an auditor.1-81-9Five examples of specific operational audits that could be conducted by an internal auditor in a manufacturing company are:1. Examine employee time records and personnel records to determineif sufficient information is available to maximize the effective use ofpersonnel.2. Review the processing of sales invoices to determine if it could bedone more efficiently.3. Review the acquisitions of goods, including costs, to determine ifthey are being purchased at the lowest possible cost consideringthe quality needed.1-9 (continued)4. Review and evaluate the efficiency of the manufacturing process.5. Review the processing of cash receipts to determine if they aredeposited as quickly as possible.1-10 When auditing historical financial statements, an auditor must have a thorough understanding of the client and its environment. This knowledge should include the client’s regulatory and operating environment, business strategies and processes, and measurement indicators. This strategic understanding is also useful in other assurance or consulting engagements. For example, an auditor who is performing an assurance service on information technology would need to understand the client’s business strategies an d processes related to information technology, including such things as purchases and sales via the Internet. Similarly, a practitioner performing a consulting engagement to evaluate the efficiency and effectiveness of a client’s manufacturing process woul d likely start with an analysis of various measurement indicators, including ratio analysis and benchmarking against key competitors.1-11 The major differences in the scope of audit responsibilities are:1. CPAs perform audits in accordance with auditing standards ofpublished financial statements prepared in accordance with U.S.GAAP or IFRS.2. GAO auditors perform compliance or operational audits in order toassure the Congress of the expenditure of public funds in accordancewith its directives and the law.3. IRS agents perform compliance audits to enforce the federal taxlaws as defined by Congress, interpreted by the courts, and regulatedby the IRS.4. Internal auditors perform compliance or operational audits in orderto assure management or the board of directors that controls andpolicies are properly and consistently developed, applied andevaluated.1-12 The four parts of the Uniform CPA Examination are: Auditing and Attestation, Financial Accounting and Reporting, Regulation, and Business Environment and Concepts.1-13 It is important for CPAs to be knowledgeable about information technology, including e-commerce, because many of their clients rely extensively on these technologies. Examples of commonly used e-commerce technologies include purchases and sales of goods through the Internet, automatic inventory reordering via direct connection to inventory suppliers, and online banking. CPAs who perform audits or provide other assurance services about information generated with these technologies need a basic knowledge and understanding of information technology and e-commerce in order to identify and respond to risks in the financial and other information generated by these technologies.Multiple Choice Questions From CPA Examinations1-14 a. (3) b. (2) c. (2) d. (3)1-15 a. (2) b. (3) c. (4) d. (3)Discussion Questions And Problems1-16 a. The relationship among audit services, attestation services and assurance services is reflected in Figure 1-3 on page 12 of the text.Audit services are a form of attestation service, and attestationservices are a form of assurance service. In a diagram, auditservices are located within the attestation service area, andattestation services are located within the assurance service area.b. 1. (2) An attestation service other than an audit service2. (1) An audit of historical financial statements3. (2) An attestation service other than an audit service4. (2) An attestation service other than an audit service; or(3) An assurance service that is not an attestation service(WebTrust developed from the AICPA Special Committeeon Assurance Services, but the service meets thecriteria for an attestation service.)5. (2) An attestation service other than an audit service6. (2) An attestation service other than an audit service7. (2) An attestation service that is not an audit service(Review services are a form of attestation, but areperformed according to Statements on Standards forAccounting and Review Services.)8. (2) An attestation service other than an audit service9. (2) An attestation service other than an audit service10. (3) An assurance service that is not an attestation service 1-17 a. The interest rate for the loan that requires a review report is lower than the loan that did not require a review because of lowerinformation risk. A review report provides moderate assurance tofinancial statement users, which lowers information risk. An auditreport provides further assurance and lower information risk. As aresult of reduced information risk, the interest rate is lowest for theloan with the audit report.b. Given these circumstances, Busch should select the loan from FirstCity Bank that requires an annual audit. In this situation, theadditional cost of the audit is less than the reduction in interest dueto lower information risk. The following is the calculation of totalcosts for each loan:c. Busch should select the loan from United National Bank due to thehigher cost of the audit and the reduced interest rate for the loanfrom United National Bank. The following is the calculation of totalcosts for each loan:d. Busch may desire to have an audit because of the many otherbenefits that an audit provides. The audit will provide Busch’smanagement with assurance about annual financial information usedfor decision-making purposes. The audit may detect errors or fraud, andprovide management with information about the effectiveness ofcontrols. In addition, the audit may result in recommendations tomanagement that will improve efficiency or effectiveness.e. The auditor must have a thorough understanding of the client and itsenvironment, including the client’s e-commerce technologies, industry,regulatory and operating environment, suppliers, customers, creditors,and business strategies and processes. This thorough analysis helpsthe auditor identify risks associated with the client’s strategies thatmay affect whether the financial statements are fairly stated. Thisstrategic knowledge of the client’s business often helps the auditoridentify ways to help the client improve business operations, therebyproviding added value to the audit function.1-18 a. The services provided by Consumers Union are very similar to assurance services provided by CPA firms. The services providedby Consumers Union and assurance services provided by CPAfirms are designed to improve the quality of information for decisionmakers. CPAs are valued for their independence, and the reportsprovided by Consumers Union are valued because ConsumersUnion is independent of the products tested.b. The concepts of information risk for the buyer of an automobile andfor the user of financial statements are essentially the same. They are both concerned with the problem of unreliable information being provided. In the case of the auditor, the user is concerned about unreliable information being provided in the financial statements.The buyer of an automobile is likely to be concerned about the manufacturer or dealer providing unreliable information.c. The four causes of information risk are essentially the same for abuyer of an automobile and a user of financial statements:(1) Remoteness of information It is difficult for a user to obtainmuch information about either an automobile manufactureror the automobile itself without incurring considerable cost.The automobile buyer does have the advantage of possiblyknowing other users who are satisfied or dissatisfied with asimilar automobile.(2) Biases and motives of provider There is a conflict betweenthe automobile buyer and the manufacturer. The buyer wantsto buy a high quality product at minimum cost whereas theseller wants to maximize the selling price and quantity sold.(3)Voluminous data There is a large amount of availableinformation about automobiles that users might like to havein order to evaluate an automobile. Either that information isnot available or too costly to obtain.(4) Complex exchange transactions The acquisition of anautomobile is expensive and certainly a complex decisionbecause of all the components that go into making a goodautomobile and choosing between a large number ofalternatives.d. The three ways users of financial statements and buyers ofautomobiles reduce information risk are also similar:(1) User verifies information him or herself That can be obtainedby driving different automobiles, examining the specifications ofthe automobiles, talking to other users and doing research invarious magazines.(2) User shares information risk with management Themanufacturer of a product has a responsibility to meet itswarranties and to provide a reasonable product. The buyerof an automobile can return the automobile for correction ofdefects. In some cases a refund may be obtained.(3) Examine the information prepared by Consumer ReportsThis is similar to an audit in the sense that independentinformation is provided by an independent party. Theinformation provided by Consumer Reports is comparable tothat provided by a CPA firm that audited financial statements.1-19 a. The following parts of the definition of auditing are related to the narrative:(1) Altman is being asked to issue a report about qualitative andquantitative information for trucks. The trucks are thereforethe information with which the auditor is concerned.(2) There are four established criteria which must be evaluatedand reported by Altman: existence of the trucks on the nightof June 30, 2011, ownership of each truck by RegionalDelivery Service, physical condition of each truck and fairmarket value of each truck.(3) Samantha Altman will accumulate and evaluate four types ofevidence:(a) Count the trucks to determine their existence.(b) Use registrations documents held by Burrow forcomparison to the serial number on each truck todetermine ownership.(c) Examine the trucks to determine each truck's physicalcondition.(d) Examine the blue book to determine the fair marketvalue of each truck.(4) Samantha Altman, CPA, appears qualified, as a competent,independent person. She is a CPA, and she spends most ofher time auditing used automobile and truck dealerships andhas extensive specialized knowledge about used trucksthat is consistent with the nature of the engagement.(5) The report results are to include:(a) which of the 25 trucks are parked in Regional'sparking lot the night of June 30.(b) whether all of the trucks are owned by RegionalDelivery Service.(c) the condition of each truck, using establishedguidelines.(d) fair market value of each truck using the current bluebook for trucks.b. The only parts of the audit that will be difficult for Altman are:(1) Evaluating the condition, using the guidelines of poor, good,and excellent. It is highly subjective to do so. If she uses adifferent criterion than the "blue book," the fair market valuewill not be meaningful. Her experience will be essential inusing this guideline.(2) Determining the fair market value, unless it is clearly definedin the blue book for each condition.1-20 a. The major advantages and disadvantages of a career as an IRS agent, CPA, GAO auditor, or an internal auditor are:(b) Other auditing careers that are available are:Auditors within many of the branches of the federal government(e.g., Atomic Energy Commission)Auditors for many state and local government units (e.g., state insurance or bank auditors)1-21 The most likely type of auditor and the type of audit for each of the examples are:1-22 a. Financial statement audits reduce information risk, which lowers borrowing costs. An audit also provides assurances to managementabout information used for decision-making purposes, and may alsoprovide recommendations to improve efficiency or effectiveness ofoperations.b. Hogan and Czarnecki likely provide tax services, accountingservices, and management advisory services. They may also provideadditional assurance and attestation services other than audits offinancial statements.c. Student answers will vary. They may identify new types of informationthat require assurance, such as environmental or corporateresponsibility reporting. Students may also identify opportunitiesfor consulting or management advisory services, such as assistancewith the adoption of international financial reporting standards.Internet Problem Solution: CPA RequirementsInternet Problem 1-1a. Answers will vary by state. Most states require 150 hours ofeducation, with specific requirements for number of accounting hoursand credit hours in other subject areas.b. Most states have frequently addressed questions. Many of theseaddress education requirements, as well as information on how toprepare for the exam, as well as information on applying for licensure.Internet Problem 1-1 (continued)c. The Elijah Watt Sells award program was established in 1923by the American Institute of Certified Public Accountants(AICPA) to recognize outstanding performance on the UniformCPA Examination. The Sells award is presented annually to tencandidates with the highest cumulative scores who completedtesting during the previous calendar year and passed all foursections of the Uniform CPA Examination on their first attempt.d. Passing information is available on the CPA Examination portion ofthe AICPA web site. Recent passing rates have been approximately45% for each section.(Note: Internet problems address current issues using Internet sources. Because Internet sites are subject to change, Internet problems and solutions may change. Current information on Internet problems is available at /arens.)。

审计一种整合方法内容

审计一种整合方法内容
审计一种整合方法内容是指对企业运营进行审计时，采用整合方法进行审计的内容。

整合方法是一种基于综合商业环境，综合使用各种审计技术的审计方法，旨在全面评估企业的风险水平、资产负债状况、财务状况、财务报告合规性等方面。

整合方法的内容包括：
1. 综合分析：通过综合考虑企业的商业环境，行业情况，市场前景等方面的因素，对企业的风险水平进行分析。

2. 风险评估：通过对企业内部控制、财务报告、税务合规等方面进行评估，识别企业存在的风险，评估风险的潜在损害程度和可能性，并提出应对措施。

3. 财务报告审计：对企业财务报告进行审计，包括资产负债表、损益表、现金流量表等财务报表的准确性和真实性的评估，以及是否符合相关法律法规和会计准则的要求。

4. 内部控制审计：对企业内部控制制度进行审计，评估其有效性和合规性，以及提出改进建议。

5. 税务审计：对企业的税务合规性进行审计，评估企业是否遵守相关税法法规，是否正确申报纳税和缴纳税款。

综合运用以上审计方法，进行整合审计，可以更全面、更准确地评估企业的风险水平和财务状况，并提出具有实际意义的建议和措施，以帮助企业进一步完善内部控制，提高经营效率和风险管理能力。

审计学：一种整合方法阿伦斯英文版第12版 RRChapter03

Describe the five circumstances when an unqualified report with an explanatory paragraph or modified wording is appropriate.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
2. Make reference in the report (modified wording report) 3. Qualify the opinion
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
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Auditor Agrees with a Departure from a Promulgated Principle
The auditor must be satisfied and must state and explain, in a separate paragraph or paragraphs in the audit report, that adhering to the principle would have produced a misleading result in that situation.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder

阿伦斯-审计学：一种整合的方法-课后习题答案ch02

阿伦斯-审计学：⼀种整合的⽅法-课后习题答案ch02 Chapter 2The CPA ProfessionReview Questions2-1The four major services that CPAs provide are:1. Assurance services Assurance services are independentprofessional services that improve the quality of information fordecision makers. Assurance services include attestation services,which are any services in which the CPA firm issues a report thatexpresses a conclusion about the reliability of an assertion that isthe responsibility of another party. The four categories of attestationservices are audits of historical financial statements, attestation onthe effectiveness of internal control over financial reporting, reviewsof historical financial statements, and other attestation services.2. Accounting and bookkeeping services Accounting services involvepreparing the client's financial statements from the client's records.Bookkeeping services include the preparation of the client'sjournals and ledgers as well as financial statements.3. Tax services Tax services include preparation of corporate,individual, and estate returns as well as tax planning assistance.4. Management consulting services These services range fromsuggestions to improve the client's accounting system to computerinstallations.2-2The major characteristics of CPA firms that permit them to fulfill their social function competently and independently are: 1. Organizational form A CPA firm exists as a separate entity to avoidan employer-employee relationship with its clients. The CPA firmemploys a professional staff of sufficient size to prevent one clientfrom constituting a significant portion of total income and therebyendangering the firm's independence.2. Conduct A CPA firm employs a professional staff of sufficient sizeto provide a broad range of expertise, continuing education, andpromotion of a professional independent attitude and competence.3. Peer review This practice evaluates the performance of CPA firmsin an attempt to keep competence high.2-3The Public Company Accounting Oversight Board provides oversight for auditors of public companies, includingestablishing auditing and quality control standards for public company audits, and performing inspections of the quality controls at audit firms performing those audits.2-4The purpose of the Securities and Exchange Commission is to assist in providing investors with reliable information upon which to make investment decisions. Since most reasonably large CPA firms have clients that must with the SEC each year (all companies filing registration statements under the securities acts of l933 and l934 must financial statements and other reports with the SEC at least once each year), the profession is highly involved with the SEC requirements.The SEC has considerable influence in setting generally accepted accounting principles and disclosure requirements for financial statements because of its authority for specifying reporting requirements considered necessary for fair disclosure to investors. In addition, the SEC has power to establish rules for any CPA associated with audited financial statements submitted to the Commission.2-5The AICPA is the organization that sets professional requirements for CPAs. The AICPA also conducts research and publishes materials on many different subjects related to accounting, auditing, management advisory services, and taxes. The organization also prepares and grades the CPA examinations, provides continuing education to its members, and develops specialty designations to help market and assure the quality of services in specialized practice areas.2-6Statement on Standards for Attestation Engagements was first issued in 1986 and its purposes were to provide a framework for attest engagements and to develop standards for those engagements. In 2001, the Auditing Standards Board issued SSAE 10 in response to the need for more detailed standards for specific types of attestation services. SSAE 10 supercedes the previously issued standards and its main purpose is to improve the usefulness of the attestation standards and provide greater flexibility to practitioners in providing assurance services.2-7 The PCAOB now has responsibility for establishing auditing standards for public companies, while the Auditing Standards Board (ASB) of the AICPA establishes auditing standards for private companies. The ASB previously had responsibility for establishing auditing standards for both public and private companies. Existing auditing standards were adopted by the PCAOB as interim auditing standards for public company audits.2-8 Generally accepted auditing standards are ten general guidelines to aid auditors in fulfilling their professional responsibilities. These guidelines include three general standards concerned with competence, independence, and due professional care; three standards of field work including planning and supervision, study and evaluation of internal control, and the gathering of competent evidential matter; and four standards of reporting which require a statement as to presentation in accordance with generally accepted accounting principles, inconsistency observed in the current period in relation to the preceding period, adequate disclosure, and the expression of an opinion as to the fairness of the presentation of the financial statements.2-8 (continued)Generally accepted accounting principles are specific rules for accounting for transactions occurring in a business enterprise. Examples may be any of the opinions of the FASB.2-9Auditors can obtain adequate technical training and proficiency through formal education in auditing and accounting, adequate practical experience, and continuing professional education. Auditors can demonstrate their proficiency by becoming licensed to practice as CPAs, which requires successful completion of the Uniform CPA Examination. The specific requirements for licensure vary from state to state.2-10For the most part, generally accepted auditing standards are general rather than specific. Many practitioners along with critics of the profession believe the standards should provide more clearly defined guidelines as an aid in determining the extent of evidence to be accumulated. This would eliminate some of the difficult audit decisions and provide a source of defense if the CPA is charged with conducting an inadequate audit. On the other hand, highly specific requirements could turn auditing into mechanical evidence gathering, void of professional judgment. From the point of view of both the profession and the users of auditing services, there is probably a greater harm from defining authoritative guidelines too specifically than too broadly.2-11International Standards on Auditing (ISAs) are issued by the International Auditing Practices Committee (IAPC) of the International Federation of Accountants (IFAC). ISAs are designed to improve the uniformity of auditing practices and related services throughout the world by issuing pronouncements on a variety of audit and attest functions and promoting their acceptance worldwide. A CPA who conducts an audit in accordance with GAAS may not comply with ISAs because there may be additional ISA requirements that extend beyond GAAS requirements.2-12 Quality controls are the procedures used by a CPA firm that help it meet its professional responsibilities to clients. Quality controls are therefore established for the entire CPA firm as opposed to individual engagements.2-13The element of quality control is personnel management. The purpose of the requirement is to help assure CPA firmsthat all new personnel should be qualified to perform their work competently. A CPA firm must have competent employees conducting the audits if quality audits are to occur.2-14 A peer review is a review, by CPAs, of a CPA firm's compliance with its quality control system. A mandatory peer review means that such a review is required periodically. AICPA member firms are required to have a peer review every three years. Registered firms with the PCAOB are subject to quality inspections. These are different than peer reviews because they are performed by independent inspection teams rather than another CPA firm.2-14 (continued)Peer reviews can be beneficial to the profession and to individual firms. By helping firms meet quality control standards, the profession gains if reviews result in practitioners doing higher quality audits. A firm having a peer review can also gain if it improves the firm's practices and thereby enhances its reputation and effectiveness, and reduces the likelihood of lawsuits. Of course peer reviews are costly. There is always a trade off between cost and benefits. A CPA firm also gives up some independence of activities when it is reviewed by another CPA firm.2-15The two divisions of practice that a CPA firm may belong to are the SEC Practice Section (renamed the Center for Public Company Audit Firms)and the Private Companies Practice Section. A firm may belong to one section, both sections, or neither. Many of the self-regulatory activities of the SECPS have been taken over by the PCAOB.Proponents of this division believe that this will improve the quality of practice by CPA firms and that it will improve self-regulation. Critics state that it establishes two classes of CPAs and implies a lower performance quality for firms that are not members of the SEC Practice Section.Multiple Choice Questions From CPA Examinations2-16 a. (1) b. (2) c. (3) d. (3)2-17 a. (2) b. (2) c. (3)Discussion Questions And Problems2-18a.The comments summarize the beliefs of many practitioners about theSarbanes–Oxley Act and the PCAOB. The arguments against the Act can be summarized as four arguments:1. Costs of complying with the Act are excessively high, especially therequirement to report on internal control over financial reporting,and will discourage companies from becoming public companies.2. Relative cost for local audit firms is excessively high.3. Additional oversight is not needed because sufficient qualitycontrols have already been implemented by most audit firms.4. Three other things already provide assurance of adequate quality:a competitive economic environment, legal liability, and auditingstandards.To support these comments, it can be argued that the profession has generally functioned well with relatively little controversy and criticism.2-18 (continued)The arguments against these comments are primarily as follows:1. Reporting on the effectiveness of internal control over financialreporting will provide benefits in improved controls, resulting inhigher quality financial reporting and reduced losses from fraud.2. The increased confidence in financial reporting will increase accessto capital and lower the cost of capital by reducing information risk.3. Changes in the scope of CPA practices and other threats to auditquality required government regulation.4. Regulation of public company audits will not affect most audit firmsthat do not have public company audit clients.b. There is no correct answer to this question. Different people reachdifferent conclusions, depending on the weights put on the various arguments. Time is needed to effectively assess both the costs and benefits of the Act.2-19 a. Engagement performanceb. Personnel managementc. Engagement performanced. Engagement performancee. Independence, integrity, and objectivityf. Monitoringg. Acceptance and continuation of clients and engagementsh. Personnel managementi. Personnel management2-20 a. Rossi and Montgomery's primary ethical consideration is their professional competence to perform all of the audit work for filingwith the SEC. In addition, if Rossi and Montgomery have performedbookkeeping services or certain consulting services for MobileHome, they will not be independent under PCAOB and SECindependence requirements. The firm must also be a registeredfirm with the PCAOB.b. The filing with the SEC, in addition to normal audited financialstatements, will require completion and registration with the SEC ofForm S-1 which includes an audited summary of operations for thelast five fiscal years as well as many additional schedules anddescriptions of the business. Each quarter subsequent to the filing,Form 10-Q must be filed; and within 90 days of the end of eachfiscal year Form 10-K must be filed with the SEC.In addition, Form 8-K must be filed whenever significant events have occurred which are of interest to public investors. These forms must be filed in conformity with Regulation S-X, whichrequires considerable disclosures in addition to those normallyrequired in audited financial statements.2-212-22 a. CPAs can provide the following information and Web links on their firm Web sites: Office locations or affiliationsLines of service the firm provides (audit, tax, management consulting, etc.)Industry specialization information for the firmOnline software tools and databasesLatest tax law developments applicable to clientsCalculators for retirement account decisionsOnline privacy management softwareb. CPA firms invest their resources to develop sophisticated Web siteslargely because of a desire to maintain a client-service approach.Increased competition motivates CPA firms to improve thetraditional paths of providing information to their clients. A CPA firmcan reach clients more quickly and efficiently with vital informationvia the firm’s Web site than through more traditional forms ofcommunication, such as a monthly or quarterly newsletter. Also, asmore clients become sophisticated in the area of technology, theyexpect their CPA firms to do the same by providing a useful Website that has links to other helpful tools and resources.c. The Internet is a useful tool for a CPA firm’s accounting andauditing practice in many ways. A firm’s Web site can be used tomarket the firm’s accounting and auditing practice. The Internetalso connects the firm’s global professional staff, making it easierfor staff from all over the world to provide client service on a timelybasis without having to be physically present at the client’s location.CPAs also use online resources and databases to remain currenton emerging business and standards-setting issues. Examplesinclude Standard and Poor’s Net Advantage Database andGoldman Sachs Research Database. These two databases provideextensive industry-specific information and coverage of companiesthat CPAs use on a subscription basis to stay current on industrydevelopments and to obtain industry data useful for auditing andconsulting.Internet Problem Solution: CPA Vision Project2-1 The CPA Vision Project [] is all about helping the “CPA profession stay on top of the change curve.”With input from CPAs across the nation, the CPA Vision process created a comprehensive and integrated vision of the profession’s future.1. What characteristics and professional services come to mind whenyou hear the term CPA? What is your impression of the public’sstereotype of CPAs?Answer: Student responses will vary.2. Fill in the missing words in the following Vision Statement:Answer:“CPAs are the trusted professionals who enable people and organizations to shape their future. Combining insight with integrity, CPAs deliver value by …Communicating the total picture with clarity and objectivity,Translating complex information into critical knowledge,Anticipating and creating opportunities, andDesigning pathways that transform vision into reality.3. Briefly describe the eight forces that will impact the profession.Answer: The eight forces are:1. Non-CPA Competitors - The number of new, non-CPA competitors, not bound by the profession's code of standardsand ethics is increasing at an alarming rate.2. Decline of new CPAs - The number of students and young people electing to join the CPA profession has dramatically declined.3. Technology Displacement - Many of the traditional, essential skills of CPAs are being replaced by new technologies thatare increasing in number and being rapidly developed, oftenfrom unexpected sources.4. Borderless World- As the world becomes borderless, the marketplace is demanding more complex, real-time adviceand services, presenting unlimited opportunities for CPAs to expand their skills, competencies, and services.5. Leadership Imperative - Corporations are conductingbusiness in a world of commerce that is global, technological, instantaneous, and increasingly virtual. The leadership they require from both internal and external advisors requires new insights, new skills, and extraordinary agility.6. Technological Advances - Technology will continue to challenge and reshape our lifestyles, work patterns,educational experiences, and communication styles and techniques. Technology will rewrite the "rules of business," leaving those who will not harness it and effectively integrateit far behind.7. Market Value Shifts- The perceived value of some of the profession's cornerstone services-accounting, auditing, andtax preparation-is declining in the marketplace.8. Pressure to Transform Finance from Scorekeeper toBusiness Partner - The CPA in business is being challengedto deliver value to the organization and help create asustainable competitive advantage.4. The CPA Vision Project suggests that “the increasing complexities of the global environment and the commodity characteristics of traditional services mandate that the CPA profession migrate up theeconomic value chain.” What is meant by “moving up the economicvalue chain,”and how are CPAs going to accomplish this? (Hint:See the “Final Report.”)Answer: Moving up the economic value chain means moving fromproviding low value products and services to providing higher valueproducts and services (i.e., services that will permit the professionto thrive in a knowledge-based, global economy). The higher on theeconomic value chain, the higher the revenue. “The more a productor service is refined and defined, the less market value it will have.For example: tax preparation services have been commoditizedand automated to the point that they can largely be preparedelectronically. Tax form preparation is a Platform 1 service - afoundation service. The higher economic value of this informationlies in understanding what the foundation service implies-the“where do we go from here”and the “so whats”of business andfinance. Higher Platform services, such as estate and financialplanning are where higher economic benefits exist for the future ofthe profession. Higher Platform services are, and will increasinglybe, the most valued services and functions, and therefore willcommand higher fees and salaries. Traditional services are thefoundation from which CPAs can leverage to higher valueservices.” The report describes 7 platforms.Obviously to move up the value chain CPAs need to develop expertise for and market higher value services. For some this mayrepresent “thinking out of the box.”(Note: Internet problems address current issues using Internet sources. Because Internet sites are subject to change, Internet problems and solutions are subject to change. Current information on Internet problems is available at ).。

审计学：一种整合方法阿伦斯英文版第12版课后答案 Chapter 11 Solutions Manual

Chapter 11Fraud AuditingReview Questions11-1Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users. Two examples of fraudulent financial reporting are accelerating the timing of recording sales revenue to increased reported sales and earnings, and recording expenses as fixed assets to increase earnings.11-2Misappropriation of assets is fraud that involves theft of an entity’s assets. Two examples are an accounts payable clerk issuing payments to a fictitious company controlled by the clerk, and a sales clerk failing to record a sale and pocketing the cash receipts.11-3 Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users, while misappropriation of assets is fraud that involves theft of an entity’s assets. Frauds involving financial reporting are usually larger than frauds involving misappropriation of assets, usually involve top management, and do not directly involve theft of company assets.11-4 The three conditions of fraud referred to as the ―fraud triangle‖ are (1) Incentives/Pressures; (2) Opportunities; and (3) Attitudes/Rationalization. Incentives/Pressures are incentives of management or other employees to commit fraud. Opportunities are circumstances that allow management or employees to commit fraud. Attitudes/Rationalization are indications that an attitude, character, or set of ethical values exist that allow management or employees to commit a dishonest act or they are in an environment that imposes sufficient pressure that causes them to rationalize committing a dishonest act.11-5 The following are example of risk factors for fraudulent financial reporting for each of the three fraud conditions:Incentives/Pressures- The company is under pressure to meet debt covenants or obtain additional financing.Opportunities –Ineffective oversight of financial reporting by the board of directors allows management to exercise discretion overreporting.Attitudes/Rationalization –Management is overly aggressive. For example, the company may issue aggressive earnings forecasts, ormake extensive acquisitions using company stock.11-6 The following are example of risk factors for misappropriation of assets for each of the three fraud conditions:Incentives/Pressures- The individual is unable to meet personal financial obligations.Opportunities –There is insufficient segregation of duties that allows the individual to handle cash receipts and related accountingrecords.Attitudes/Rationalization –Management has disregarded the inadequate separation of duties that allows the potential theft ofcash receipts.11-7 Auditors use several sources to gather information about fraud risks, including:Information obtained from communications among audit team members about their knowledge of the company and its industry,including how and where the company might be susceptible tomaterial misstatements due to fraud.Responses to auditor inquiries of management about their views of the risks of fraud and about existing programs and controls toaddress specific identified fraud risks.Specific risk factors for fraudulent financial reporting and misappropriations of assets.Analytical procedures results obtained during planning that indicate possible implausible or unexpected analytical relationships.Knowledge obtained through other procedures such as client acceptance and retention decisions, interim review of financialstatements, and consideration of inherent or control risks.11-8 SAS 99 requires the audit team to conduct discussions to share insights from more experienced audit team members and to ―brainstorm‖ ideas that address the following:1. How and where they believe the entity’s financial statements mightbe susceptible to material misstatement due to fraud. This shouldinclude consideration of known external and internal factorsaffecting the entity that mightcreate an incentive or pressure for management to commit fraud.provide the opportunity for fraud to be perpetrated.indicate a culture or environment that enables management to rationalize fraudulent acts.2. How management could perpetrate and conceal fraudulent financialreporting.3. How assets of the entity could be misappropriated.4. How the auditor might respond to the susceptibility of materialmisstatements due to fraud.11-9 Auditors must inquire whether management has knowledge of any fraud or suspected fraud within the company. SAS 99 also requires auditors to inquire of the audit committee about its views of the risks of fraud and whether the audit committee has knowledge of any fraud or suspected fraud. If the entity has an internal audit function, the auditor should inquire about internal audit’s views of fraud risks and whether they have performed any procedures to identify or detect fraud during the year. SAS 99 further requires the auditor to make inquiries of others within the entity whose duties lie outside the normal financial reporting lines of responsibility about the existence or suspicion of fraud.11-10The corporate code of conduct establishes the ―tone at the top‖ of the importance of honesty and integrity and can also provide more specific guidance about permitted and prohibited behavior. Examples of items typically addressed in a code of conduct include expectations of general employee conduct, restrictions on conflicts of interest, and limitations on relationships with clients and suppliers.11-11 Management and the board of directors are responsible for setting the ―tone at the top‖ for ethical behavior in the company. It is important for management to behave with honesty and integrity because this reinforces the importance of these values to employees throughout the organization.11-12 Management has primary responsibility to design and implement antifraud programs and controls to prevent, deter, and detect fraud.The audit committee has primary responsibility to oversee the organization’s financial reporting and internal control processes and to p rovide oversight of management’s fraud risk assessment process and antifraud programs and controls.11-13The three auditor responses to fraud are: (1) change the overall conduct of the audit to respond to identified fraud risks; (2) design and perform audit procedures to address identified risks; and (3) perform procedures to address the risk of management override of controls.11-14Auditors are required to take three actions to address potential management override of controls: (1) examine journal entries and other adjustments for evidence of possible misstatements due to fraud; (2) review accounting estimates for biases; and (3) evaluate the business rationale for significant unusual transactions.11-15 Three main techniques use to manipulate revenue include: (1) recording of fictitious revenue; (2) premature revenue recognition including techniques such as bill-and-hold sales and channel stuffing; and (3) manipulation of adjustments to revenue such as sales returns and allowance and other contra accounts.11-16 Cash register receipts are particularly susceptible to theft. The notice ―your meal is free if we fail to give you a receipt‖ is designed to ensure that everycustomer is given a receipt and all sales are entered into the register, establish accountability for the sale.11-17 The three types of inquiry are informational, assessment, and interrogative. Auditors use informational inquiry to obtain information about facts and details that the auditor does not have.For example, if the auditor suspects financial statement fraud involving improper revenue recognition, the auditor may inquire of management as to revenue recognition policies. The auditor uses assessment inquiry to corroborate or contradict prior information. In the previous example, the auditor may attempt to corroborate the information obtained from management by making assessment inquiries of individuals in accounts receivable and shipping. Interrogative inquiry is used to determine if the interviewee is being deceptive or purposefully omitting disclosure of key knowledge of facts, events, or circumstances. For example, a senior member of the audit team might make interrogative inquiries of management or other personnel about key elements of the fraud where earlier responses were contradictory or evasive.11-18 When making inquiries of a deceitful individual, three examples of verbal cues are frequent rephrasing of the question, filler terms such as ―well‖ or ―to tell the truth,‖ and forgetfulness or acknowledgements of nervousne ss. Three examples of nonverbal cues by the individual are creating physical barriers by blocking their mouth, leaning away from the auditor, and signs of stress such as sweating or fidgeting.11-19When the auditor suspects that fraud may be present, SAS 99 requires the auditor to obtain additional evidence to determine whether material fraud has occurred. SAS 99 also requires the auditor to consider the implications for other aspects of the audit. When the auditor determines that fraud may be present, SAS 99 requires the auditor to discuss the matter and audit approach for further investigation with an appropriate level of management that is at least one level above those involved, and with senior management and the audit committee, even if the matter might be considered inconsequential. For public company auditors, the discovery of fraud of any magnitude by senior management is at least a significant deficiency and may be a material weakness in internal control over financial reporting. This includes fraud by senior management that results in even immaterial misstatements. If the public company auditor decides the fraud is a material weakness, the auditor’s report on internal control over financial reporting will contain an adverse opinion.■Multiple Choice Questions From CPA Examinations11-20 a. (3) b. (4) c. (1) d. (2)11-21 a. (1) b. (4)11-22 a. (1) b. (1) c. (1)■Discussion Questions and Problems11-2311-24a. Management fraud is often called fraudulent financial reporting, andis the intentional misstatement or omission of amounts ordisclosures by management with the intent to deceive users. Incontrast, defalcations, which are also called misappropriation ofassets, involve theft of an entity’s assets, and normally involveemployees and others below the management level.b. The auditor’s responsibility to detect management fraud is thesame as for other errors that affect the financial statement. Theauditor should design the audit to obtain reasonable assurance thatmaterial misstatements in the financial statements due to errors orfraud are detected.c. The auditor should evaluate the potential for management fraudusing the fraud triangle of incentives/pressures, opportunities, andattitudes/ rationalizations.Incentives/pressures –Auditors should evaluate incentives and pressures that management or other employees mayhave to misstate financial statements, including:1. Declines in the financial stability or profitability of thecompany due to economic, industry, or companyoperating conditions.2. Pressure to meet debt repayment or debt covenantterms.3. Net worth of managers or directors is materiallythreatened by financial performance.Opportunities –Circumstances provide an opportunity for management to misstate financial statements, such as:1. Financial statements include significant accountingestimates that are difficult to verify.2. Ineffective board of director or audit committeeoversight.3. High turnover in accounting personnel or ineffectiveaccounting, internal auditing, or IT staff.Attitudes/Rationalizations –An attitude, character, or set of values exist that allows management to rationalizecommitting a dishonest act.1. Inappropriate or ineffective communication of entityvalues.2. History of violations of securities laws or other lawsand regulations.3. Aggressive or unrealistic management goals orforecasts.d. There are potentially many factor s that should heighten an auditor’sconcern about the existence of management fraud. The factors (1) of an intended public placement of securities, and (2) management compensation dependent on operating results are both factors that affect incentives to manipulate financial statements. The auditor should be alert for other incentives, such as the existence of debt covenants or planned use of stock to acquire another company that may provide incentives to manipulate the financial statements.The third factor of deficient internal control reflects both an opportunity to misstatement financial statements, and an attitude that allows rationalization of actions to misstate the financial statements. As additional examples, the auditor should be alert to the potential to use accounting estimates or discretion over the timing of revenues to misstate financial statements. The auditor should also consider the attitude of management, and whether they are overly aggressive or have previously violated securities laws or other regulations.In addition to the risk factors from the fraud triangle, the auditor should consider other signals of the potential existence of management fraud. These signals may include unusual changes inratios or other performance measures, as well as inquiries ofmanagement and communication amount the audit team.11-25a.b. All of the deficiencies increase the likelihood of misappropriation of assets,by allowing individuals access to cash receipts or failing to maintain adequate records to establish accountability for cash receipts.c. The deficiencies have less of an effect on the likelihood of fraudulentfinancial reporting than they do for misappropriation of assets. The first four deficiencies increase the likelihood of fraudulent financial reporting forreported revenues due to the lack of adequate records to establish the number of patrons.11-261. a. Errorb. Internal verification of invoice preparation and posting by anindependent person.c. Test clerical accuracy of sales invoices.2. a. Fraud.b. The prelisting of cash receipts should be compared to thepostings in the accounts receivable master file and to thevalidated bank deposit slip.c. Trace cash received from prelisting to cash receipts journal.Confirm accounts receivable.3. a. Error.b. Use of prenumbered bills of lading that are periodicallyaccounted for.c. Trace a sequence of prenumbered bills of lading to recordedsales transactions. Confirm accounts receivable at year-end.4. a. Error.b. No merchandise may leave the plant without the preparationof a prenumbered bill of lading.c. Trace credit entries in the perpetual inventory records to billsof lading and the sales journal. Confirm accounts receivableat year-end.5. a. Error.b. Internal review and verification by an independent person.c. Test accuracy of invoice classification.6. a. Errorb. Online sales are supported by shipping documents andapproved online customer orders.c. Trace sales journal or listing entries to supporting documentsfor online sales, including sales invoices, shippingdocuments, sale orders, and customer orders.7. a. Errorb. Sales invoices are prenumbered, properly accounted for inthe sales journal, and a notation on the invoice is made ofentry into the sales journal.c. Account for numerical sequence of invoices recorded in thesales journal, watching for duplicates. Confirm accountsreceivable at year-end.8. a. Fraud.b. All payments from customers should be in the form of acheck payable to the company. Monthly statements shouldbe sent to all customers.c. Trace from recorded sales transactions to cash receipts forthose sales; confirm accounts receivable balances at year-end.11-27a. The lack of separation of duties was the major deficiency thatpermitted the fraud for Appliance Repair and Service Company.Gyders has responsibility for opening mail, prelisting cash, updatingaccounts receivable, and authorizing sales allowances and write-offs for uncollectible accounts. It is easy for Gyders to take the cashbefore it is prelisted and to charge off an accounts receivable as asales allowance or as a bad debt.b. The benefit of prelisting cash is to immediately document cashreceipts at the time that they are received by the company.Assuming all cash is included on the prelisting, it is then easy forsomeone to trace from the prelisting to the cash receipts journaland deposits. Furthermore, if a dispute arises with a customer, it iseasy to trace to the prelisting and determine when the cash wasactually received. The prelisting should be prepared by acompetent person who has no significant responsibilities foraccounting functions. The person should not be in a position towithhold the recording of sales, adjust accounts receivable or salesfor credits, or adjust accounts receivable for sales returns andallowances or bad debts.c. Subsequent to the prelisting of cash, it is desirable for anindependent person to trace from the prelisting to the bankstatement to verify that all amounts were deposited. This can bedone by anyone independent of whoever does the prelisting, orprepares or makes the deposit.d. A general rule that should be followed for depositing cash is that itshould be deposited as quickly as possible after it is received, andhandled by as few people as possible. It is, ideally, the personreceiving the cash that should prepare the prelisting and preparethe deposit immediately afterward. That person should then depositthe cash in the bank. Any unintentional errors in the preparation ofthe bank statement should be discovered by the bank. Theauthenticated duplicate deposit slip should be given to theaccounting department who would subsequently compare the totalto the prelisting. When an independent person prepares the bankreconciliation, there should also be a comparison of the prelisting tothe totals deposited in the bank.Any money taken before the prelisting should be uncovered by the accounting department when they send out monthlystatements to customers. Customers are likely to complain if theyare billed for sales for which they have already paid.11-28b. Deficiencies 1, 2, 4, 5, and 6 increase the likelihood of fraudinvolving misappropriation of assets. Fraud involvingmisappropriation of assets is relatively common for payroll,although the amounts are often not material. Fraudulent financialreporting involving payroll is less likely.11-29a. The auditor must conduct the audit to detect errors and fraud,including embezzlement, that are material to the financialstatements. It is more difficult to discover embezzlements thanmost types of errors, but the auditor still has significantresponsibility. In this situation, the deficiencies in internal controlare such that it should alert the auditor to the potential for fraud. Onthe other hand, the fraud may be immaterial and therefore not be ofmajor concern. The auditor of a public company must also considerthe impact of noted deficiencies when issuing the auditor’s reporton internal control over financial reporting. When noted deficienciesare considered to be material weaknesses, whether individually orcombined with other deficiencies, the auditor’s r eport must bemodified to reflect the presence of material weaknesses.b. The following deficiencies in internal control exist:1. The person who reconciles the bank account does notcompare payees on checks to the cash disbursementsjournal.2. The president signs blank checks, thus providing no controlover expenditures.3. No one checks invoices to determine that they are cancelledwhen paid.c. To uncover the fraud, the auditor could perform the following procedures:1. Comparison of payee on checks to cash disbursementsjournal.2. Follow up all outstanding checks that did not clear the bankduring the engagement until they clear the bank. Comparepayee to cash disbursements journal.11-30a.* Fraud involves intent. The circumstances suggest that there wasno intent on the part of Franklin to be deceptive. If the purpose ofomitting the footnote was to deceive the bank, then this casewould represent fraudulent financial reporting.11-311. a. There may be unrecorded cash disbursement transactions.b. Because the transactions relate to cash disbursements, thecash account will be affected. The accounts payableaccount may be misstated if the disbursement is thepayment on an account. If the disbursement is for the directpayment of an expense or is related to the purchase ofassets, then expense or asset accounts will be affected.Payments on other liability accounts would impact thoseliability accounts.c. Existing transactions are recorded (completeness).2. a. There may be fictitious accounts receivable accountsincluded in the master file.b. Accounts receivable and sales are likely to be affected byfictitious receivables.c. Amounts included exist (existence).3. a. Management may have manipulated key assumptionsso that pension expense and pension liability amounts wouldbe lower.b. Pension expense and pension liability accounts are likely tobe affected.c. Amounts included are stated at the correct values(Accuracy).4. a. The client may have shipped and recorded largeamounts of goods close to year end to third parties who mayhold the goods on consignment or who have full rights ofreturn. These shipments were made to record a fictitioussale and related receivable.b. Accounts receivable and sales and the related costs ofgoods sold and ending inventory would be affected by thisactivity.c. Recorded amounts existed (occurrence).5. a. Assets that were misappropriated may be concealedby recording purchase transactions using non-standard,fictitious vendor numbers.b. Accounts payable would be overstated and the related assetaccount would be increased by the unauthorized transaction.c. Recorded amounts existed (occurrence).6. a. Sales may be fictitiously recorded before any goodswere shipped.b. Sales and accounts receivable.c. Recorded amounts existed (occurrence).■Case11-32a. There are many fraud risk factors indicated in the dialogue. Among thefraud risk factors are the following:A significant portion of Mint’s compensation is represented bybonuses and stock options. Although this arrangement has beenapp roved by SCS’s Board of Directors, this may be a motivation forMint, the new CEO, to engage in fraudulent financial reporting.Mint’s statement to the stock analysts that SCS’s earnings would increase by 30% next year may be both an unduly aggressive andunrealistic forecast. That forecast may tempt Mint to intentionallymisstate certain ending balances this year that would increase theprofitability of the next year.SCS’s audit committee may not be sufficiently objective because Green, the chair of the audit committee, hired Mint, the new CEO,and they have been best friends for years.One individual, Mint, appears to dominate management without any compensating controls. Mint seems to be making all the importantdecisions without any apparent input from other members ofmanagement or resistance from the Board of Directors.There were frequent disputes between Brown, the prior CEO, who like Mint apparently dominated management and the Board ofDirectors, and Jones, the predecessor auditor. This fact mayindicate that an environment exists in which management will bereluctant to make any changes that Kent suggests.Management seems satisfied with an understaffed and ineffective internal audit department. This situation displays an inappropriateattitude regarding the internal control environment.Management has failed to properly monitor and correct a significant deficiency in its internal control—the lack of segregation of duties incash disbursements. This disregard for the control environment isalso a risk factor.Information about anticipated future layoffs has spread among the employees. This information may cause an increase in the risk ofmaterial misstatement arising from the misappropriation of assetsby dissatisfied employees.b. Kent has many misconceptions regarding the consideration of fraud in theaudit of SCS’s financial statements that are contained in the dialogue.Among Kent’s misconceptions are the following:Kent states that the auditor does not have specific duties regarding fraud. In fact, an auditor has a responsibility to specifically assessthe risk of material misstatement due to fraud and to consider thatassessment in designing the audit procedures to be performed.Kent is not concerned about Mint’s employment contract. Kent shou ld be concerned about a CEO’s contract that is based primarilyon bonuses and stock options because such an arrangement mayindicate a motivation for management to engage in fraudulentfinancial reporting.Kent does not think that Mint’s forecast for 2006 has an effect on the financial statement audit for 2005. However, Kent shouldconsider the possibility that Mint may intentionally misstate the2005 ending balances to increase the reported profit in 2006.Kent believes the audit programs are fine as is. Actually, Kent should modify the audit programs because of the many risk factorsthat are present in the SCS audit.Kent is not concerned that the internal audit department is ineffective and understaffed. In fact, Kent should be concerned thatSCS has permitted this situation to continue because it representsa risk factor relating to misstatements arising from fraudulentfinancial reporting and/or the misappropriation of assets.Kent states that an auditor provides no assurances about fraud because that is management’s job. In fact, an auditor has aresponsibility to plan and perform an audit to obtain reasonableassurance about whether the financial statements are free ofmaterial misstatement, whether caused by error or fraud.Kent is not concerned that t he prior year’s material weakness in internal control has not been corrected. However, Kent should beconcerned that the lack of segregation of duties in the cashdisbursements department represents a risk factor relating tomisstatements arising from the misappropriation of assets. If theclient was a publicly traded company, the presence of anuncorrected material weakness would significantly affect theauditor’s report on internal control over financial reporting.Kent does not believe the rumors about big layoffs in the next month have an effect on audit planning. In planning the audit, Kentshould consider this a risk factor because it may cause an increasein the risk of material misstatement arising from misappropriation ofassets by dissatisfied employees.c. SAS 99 requires that auditors document the following matters related tothe auditor’s consideration of material misstatements due to fraud:The discussion among engagement team personnel in planning the audit about the susceptibility of the enti ty’s financial statements tomaterial fraud.Procedures performed to obtain information necessary to identify and assess the risks of material fraud.Specific risks of material fraud that were identified, and a description of the auditor’s response to tho se risks.Reasons supporting a conclusion that there is not a significant risk of material improper revenue recognition.。

审计学：一种整合方法_第12版_英文版Chapter06

It requires the CEO and the CFO of public companies to certify the quarterly and annual financial statements submitted to the SEC.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
General ledger and subsidiary
records
General ledger trial balance
Acquisition of goods
and services
Acquisitions journal
Financial statements
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6 - 15
Transaction Flow Example
Transactions
Cash disbursements
Payroll services and disbursements
Journals Cash
disbursements journal
Payroll journal
Ledgers, Trial Balance, and Financial
6-7
Management’s Responsibilities
The Sarbanes-Oxley Act provides for criminal penalties for anyone who knowingly falsely certifies the statements.

审计学：一种整合方法_第12版_英文版Chapter01-文档资料

interpretations
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
The Act established the Public Company Accounting Oversight Board.
It also requires auditors to attest to management reports on the effectiveness of internal control over financial reporting.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
1-2
Learning Objective 1
Describe auditing.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
The Demand for Audit and Other Assurance Services
Chapter 1
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
1-1
Sarbanes-Oxley Act
1-8
Audit of a Tax Return Example
Competent, independent
peral tax returns filed by taxpayer

阿伦斯审计学：一种整合方法课后习题答案.docx

Chapter 1The Demand for Audit and Other Assurance ServicesReview Questions1-1The relationship among audit services,attestation services,and assurance services is reflected in Figure 1-3 on page 13 of the text. Anassurance service is an independent professional service to improve thequality of information for decision makers. An attestation service is aform of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party.Audit services are a form of attestation service in which the auditor expresses a written conclusion about the degree of correspondence between information and established criteria.The most commonform of audit service is an audit of historical financial statements, in which the auditor expresses a conclusion as towhether the financial statements are presented in conformity with generally accepted accounting principles.An example of an attestation service is a report on the effe ctiveness of an entity’s internal control over financial reporting.There are many possible forms of assurance services,including services related to business performance measurement, health care performance, and information system reliability.1-2An independent audit is a means of satisfying the need for reliable information on the part of decision makers.Factors of a complex society which contribute to this need are:1.Remoteness of informationa.Owners (stockholders) divorced from managementb.Directors not involved in day-to-day operations or decisionsc.Dispersion of the business among numerous geographiclocations and complex corporate structures2.Biases and motives of providerrmation will be biased in favor of the providerwhen his or her goals are inconsistent with thedecision maker's goals.3.Voluminous dataa.Possibly millions of transactions processed dailyvia sophisticated computerized systemsb.Multiple product linesc.Multiple transaction locationsplex exchange transactionsa.New and changing business relationships leadto innovative accounting and reporting problemsb.Potential impact of transactions not quantifiable, leading toincreased disclosures1-3 1. Risk-free interest rate This is approximately the rate the bank couldearn by investing in U.S. treasury notes for the same length of time asthe business loan.2.Business risk for the customer This risk reflects the possibility that thebusiness will not be able to repay itsloan because of economic or business conditions such as arecession,poor management decisions,or unexpectedcompetition in the industry.rmation risk This risk reflects the possibility thatthe information upon which the business risk decision was made wasinaccurate. A likely cause of the information risk is the possibility ofinaccurate financial statements.Auditing has no effect on either the risk-free interest rate or business risk.However, auditing can significantly reduce informationrisk.1-4The four primary causes of information risk are remoteness of information,biases and motives of the provider,voluminous data,and the existence of complex exchange transactions.The three main ways to reduce information risk are:er verifies the information.er shares the information risk with management.3.Audited financial statements are provided.The advantages and disadvantages of each are as follows:ADVANTAGES DISADVANTAGESUSER VERIFIES 1. User obtains information 1.High cost ofINFORMATION desired.obtaining2. User can be more information.confident of the 2.Inconvenience toqualifications and the personactivities of the person providing thegetting the rmation becauselarge number ofusers would be onpremises.USER SHARES 1.No audit costs incurred. INFORMATIONRISK WITHMANAGEMENT er may not beable to collecton losses.AUDITED 1.Multiple users obtain 1. May not meet needs FINANCIAL the information.of certain users. STATEMENTS ARE rmation risk can 2. Cost may be higher PROVIDED usually be reduced than the benefitssufficiently to satisfy in some situations,users at reasonable such as for a smallpany.3.Minimal inconvenience tomanagement by havingonly one auditor.1-5To do an audit, there must be information in a verifiable form and some standards( criteria)by which the auditor can evaluate the information. Examples of established criteria include generally acceptedaccounting principles and the Internal Revenue Code.Determining the degree of correspondence between information and established criteria is determining whether a given set of information is in accordance with theestablished criteria. The information for Jones Company's tax return isthe federal tax returns filed by the company. The established criteriaare found in the Internal Revenue Code and all interpretations. For theaudit of Jones Company's financial statements the information is the financial statements being audited and the established criteria are generally accepted accounting principles.1-6The primary evidence the internal revenue agent will use in the audit of the Jones Company's tax return include all available documentation and other information available in Jones' office or fromother sources.For example,when the internal revenue agent audits taxable income, a major source of information will be bank statements,the cash receipts journal and deposit slips. The internal revenue agentis likely to emphasize unrecorded receipts and revenues. For expenses,major sources of evidence are likely to be cancelled checks,vendors' invoices and other supporting documentation.1-7This apparent paradox arises from the distinction between the function of auditing and the function of accounting.The accounting function is the recording,classifying and summarizing of economic events to provide relevant information to decision makers. The rules ofaccounting are the criteria used by the auditor for evaluating the presentation of economic events for financial statements and he or shemust therefore have an understanding of generally accepted accounting principles(GAAP), as well as auditing standards.The accountant need not, and frequently does not, understand what auditors do, unless he orshe is involved in doing audits, or has been trained as an auditor.1-8OPERATIONAL COMPLIANCE AUDITS OF FINANCIALAUDITS AUDITS STATEMENTSPURPOSE To evaluate To determine To determinewhether whether the client whether theoperating is following overallprocedures are specific procedures financialefficient and set by higher statements areeffective authority presented inaccordance withspecifiedcriteria(usually GAAP) USERS OF Management of Authority setting Different groups AUDIT REPORT organization down procedures,for differentinternal or purposes — manyexternal outside entities NATURE Highly Not standardized,Highlynonstandard;but specific and standardizedoften usually objectivesubjectivePERFORMED BY:CPAsFrequently Occasionally AlmostuniversallyGAOFrequently Frequently Occasionally AUDITORSIRSNever Universally NeverAUDITORSINTERNALFrequently Frequently Frequently AUDITORS1-9 Five examples of specific operational audits that could be conducted by an internal auditor in a manufacturing company are:1.Examine employee time cards and personnel records to determine ifsufficient information is available to maximizethe effective use of personnel.2.Review the processing of sales invoices to determine ifit could be done more efficiently.3.Review the acquisitions of goods,including costs,todetermine if they are being purchased at the lowest possiblecost considering the quality needed.4.Review and evaluate the efficiency of the manufacturingprocess.5.Review the processing of cash receipts to determine ifthey are deposited as quickly as possible.1-10 When using a strategic systems auditing approach in an audit of historical financial statements,an auditor must have a thorough understanding of the client and its environment. This knowledge shouldinclude the client ’s regulatory and operating environment,business strategies and processes,and measurement indicators.The strategic systems approach is also useful in other assurance or consulting engagements. For example, an auditor who is performing an assurance service on information technology would need to understand the client’s business strategies and processes related to information technology, including such things as purchases and sales via the Internet. Similarly,a practitioner performing a consulting engagement to evaluate the efficiency and effectiveness of a cli ent ’s manufacturing process would likely start with an analysis of various measurement indicators, including ratio analysis and benchmarking against key competitors.1-11The major differences in the scope of audit responsibilities are:1.CPAs perform audits in accordance with auditing standards ofpublished financial statements prepared in accordance withgenerally accepted accounting principles.2.GAO auditors perform compliance or operational audits inorder to assure the Congress of the expenditure of publicfunds in accordance with its directives and the law.3.IRS agents perform compliance audits to enforce thefederal tax laws as defined by Congress, interpreted by thecourts, and regulated by the IRS.4.Internal auditors perform compliance or operational auditsin order to assure management or the board of directors thatcontrols and policies are properly and consistentlydeveloped, applied and evaluated.1-12 The four parts of the Uniform Attestation, Financial Accounting CPA Examinationand Reporting,are: AuditingRegulation,andandBusiness Environment and Concepts.1-13 It is important for CPAs to be knowledgeable about e-commerce technologies because more of their clients are rapidly expanding theiruse of e-commerce. Examples of commonly used e-commerce technologiesinclude purchases and sales of goods through the Internet,automatic inventory reordering via direct connection to inventory suppliers,and online banking.CPAs who perform audits or provide other assurance services about information generated with these technologies need a basic knowledge and understanding of information technology and e-commerce in order to identify and respond to risks in the financialand other information generated by these technologies.Multiple Choice Questions From CPA Examinations1-14 a.(3) b.(2) c.(2) d.(3)1-15 a.(2) b.(3) c.(4) d.(3)Discussion Questions And Problems1-16 a.The relationship among audit services, attestation servicesand assurance services is reflected in Figure 1-3 on page 13of the text.Audit services are a form of attestationservice,and attestation services are a form of assuranceservice. In a diagram, audit services are located within theattestation service area, and attestation services arelocated within the assurance service area.b. 1.(1)Audit of historical financial statements2.(2)An attestation service other than an auditservice; or(3)An assurance service that is not an attestationservice ( WebTrust developed from the AICPASpecial Committee on Assurance Services, but theservice meets the criteria for an attestation service.)3.(2)An attestation service other than an auditservice4.(2)An attestation service other than an auditservice5.(2)An attestation service other than an auditservice6.(2)An attestation service that is not an auditservice(Review services are a form ofattestation,but are performed according toStatements on Standards for Accounting andReview Services.)7.(2)An attestation service other than an auditservice8.(2)An attestation service other than an auditservice9.(3) An assurance service that is not an attestationservice1-17 a.The interest rate for the loan that requires a review reportis lower than the loan that did not require a review becauseof lower information risk. A review report provides moderateassurance to financial statement users,which lowersinformation risk. An audit report provides further assuranceand lower information risk.As a result of reducedinformation risk, the interest rate is lowest for the loanwith the audit report.b.Given these circumstances,Vial-tek should select the loanfrom City First Bank that requires an annual audit. In thissituation, the additional cost of the audit is less than thereduction in interest due to lower information risk.Thefollowing is the calculation of total costs for each loan:LENDERCPA COST OF CPA ANNUAL ANNUAL SERVICE SERVICES INTEREST LOAN COSTExisting loan None0$ 142,500$ 142,500 First National Review$ 12,000$ 127,500$ 139,500 BankCity First Bank Audit$ 20,000$ 112,500$ 132,5001-17 (continued)c.Vial-tek may desire to have an audit because of the manyother positive benefits that an audit provides.The auditwill provide Vial-tek ’s management with assurance aboutannual financial information used for decision-makingpurposes. The audit may detect errors or fraud, and providemanagement with information about the effectiveness ofcontrols.In addition,the audit may result inrecommendations to management that will improve efficiencyor effectiveness.d.Under a strategic systems audit approach,the auditor musthave a thorough understanding of the client and itsenvironment, including the client’s e -commerce technologies,industry,regulatory and operating environment,suppliers,customers, creditors, and business strategies and processes.This thorough analysis helps the auditor identify risksassociated with the client ’s strategies that may affectwhether the financial statements are fairly stated.Whenapplying the strategic systems audit approach,the auditoroften discovers ways to help the client improve businessoperations,thereby providing added value to the auditfunction.1-18 a.The services provided by Consumers Union are very similar toassurance services provided by CPA firms.The servicesprovided by Consumers Union and assurance services providedby CPA firms are designed to improve the quality ofinformation for decision makers.CPAs are valued for theirindependence,and the reports provided by Consumers Unionare valued because Consumers Union is independent of theproducts tested.b.The concepts of information risk for the buyer of anautomobile and for the user of financial statements areessentially the same.They are both concerned with theproblem of unreliable information being provided.In thecase of the auditor, the user is concerned about unreliableinformation being provided in the financial statements. Thebuyer of an automobile is likely to be concerned about themanufacturer or dealer providing unreliable information.c.The four causes of information risk are essentially the samefor a buyer of an automobile and a user of financialstatements:(1)Remoteness of information It is difficult for a userto obtain much information about either an automobilemanufacturer or the automobile itself withoutincurring considerable cost. The automobile buyer doeshave the advantage of possibly knowing other users whoare satisfied or dissatisfied with a similar automobile.(2)Biases and motives of provider There is a conflictbetween the automobile buyer and the manufacturer. Thebuyer wants to buy a high quality product at minimumcost whereas the seller wants to maximize the sellingprice and quantity sold.(3)Voluminous data There is a large amount of availableinformation about automobiles that users might like tohave in order to evaluate an automobile.Either that information is not available or too costly to obtain.1-18(continued)(4)Complex exchange transactions The acquisition of anautomobile is expensive and certainly a complexdecision because of all the components that go intomaking a good automobile and choosing between a largenumber of alternatives.d. The three ways users of financial statements and buyers ofautomobiles reduce information risk are also similar:(1)User verifies information him or herself That can beobtained by driving different automobiles,examiningthe specifications of the automobiles,talking toother users and doing research in various magazines.(2)User shares information risk with management The manufacturerof a product has a responsibility to meetits warranties and to provide a reasonable product.The buyer of an automobile can return the automobilefor correction of defects. In some cases a refund maybe obtained.(3)Examine the information prepared by Consumer ReportsThis is similar to an audit in the sense thatindependent information is provided by an independentparty. The information provided by Consumer Reports iscomparable to that provided by a CPA firm that auditedfinancial statements.1-19 a. The following parts of the definition of auditing are relatedto the narrative:(1)Virms is being asked to issue a report aboutqualitative and quantitative information for trucks.The trucks are therefore the information with whichthe auditor is concerned.(2)There are four established criteria which must beevaluated and reported by Virms:existence of thetrucks on the night of June30, 2005,ownership ofeach truck by Regional Delivery Service,physicalcondition of each truck and fair market value of eachtruck.(3)Susan Virms will four types ofaccumulate and evaluateevidence :(a)Count the trucks to determine their existence.(b)Use registrations documents held by Oatley forcomparison to the serial number on each truck todetermine ownership.(c)Examine the trucks to determine each truck's physicalcondition.(d)Examine the blue book to determine the fair marketvalue of each truck.(4)Susan Virms,CPA, appears qualified,as a competent,independent person. She is a CPA, and she spends mostof her time auditing used automobile and truck dealerships and has extensive specialized knowledge about used trucks that is consistent with the nature of the engagement.1-19(continued)(5)The report results are to include:(a)which of the 35 trucks are parked in Regional'sparking lot the night of June 30.(b)whether all of the trucks are owned byRegional Delivery Service.(c)the condition of each truck, using establishedguidelines.(d)fair market value of each truck using the current bluebook for trucks.b.The only parts of the audit that will be difficult forVirms are:(1)Evaluating the condition, using the guidelines of poor,good, and excellent. It is highly subjective to do so.If she uses a different criterion than the"bluebook,"the fair market value will not be meaningful.Her experience will be essential in using thisguideline.(2)Determining the fair market value,unless it isclearly defined in the blue book for each condition.1-20 a. The major advantages and disadvantages of a career as an IRS agent, CPA, GAO auditor, or an internal auditor are:EMPLOYMENT ADVANTAGES DISADVANTAGESINTERNAL 1.Extensive training in 1.Experience limited to REVENUE individual, corporate,taxes.AGENT gift, trust and other 2.No experience withtaxes is available with operational or financialconcentration in area statement auditing.chosen. 3.Training is not2.Hands-on experience with extensive with anysophisticated selection business enterprise.techniques.CPA 1.Extensive training in 1. Exposure to taxes and toaudit of financial the business enterprisestatements, compliance may not be as in-depthauditing and operational as the internal revenueauditing.agent or the internal2.Opportunity for auditor.experience in auditing, 2. Likely to be lesstax consulting, and exposed to operationalmanagement consulting auditing than is likelypractices.for internal auditors.3.Experience in a diversityof enterprises andindustries with theopportunity to specializein a specific industry.GAO AUDITOR 1.Increasing opportunity 1.Little exposure tofor experience in diversity of enterprisesoperational auditing.and industries.2.Exposure to highly 2.Bureaucracy of federalsophisticated statistical government.sampling and computerauditing techniques.1-20(continued)EMPLOYMENT ADVANTAGESINTERNAL 1.Extensive exposure to all AUDITOR segments of theenterprise with whichemployed.2.Constant exposure to oneindustry presentingopportunity for expertisein that industry.3.Likely to have exposureto compliance, financialand operational auditing.DISADVANTAGES1.Little exposure totaxation and theaudit thereof.2.Experience is limited toone enterprise, usuallywithin one or a limitednumber of industries.(b)Other auditing careers that are available are:Auditors within many of the branches of the federalgovernment ., Atomic Energy Commission)Auditors for many state and local government units .,state insurance or bank auditors)1-21 The most likely type of auditor and the type of audit for each ofthe examples are:EXAMPLE TYPE OF AUDITOR TYPE OF AUDITIRS Compliance1.GAO OperationalInternal auditor or CPA Operational2.CPA or Internal auditor Financial statementsGAO Operational3.CPA Financial statementsGAO Financial statements4.IRS ComplianceCPA Financial statements5.Internal auditor or CPA ComplianceInternal auditor or CPA Financial statements6.GAO Compliance7.8.9.10.11.12.1-22 a.The conglomerate should either engage the management advisory services division of a CPA firm or its own internalauditors to conduct the operational audit.b.The auditors will encounter problems in establishingcriteria for evaluating the actual quantitative events andin setting the scope to include all operations in whichsignificant inefficiencies might exist.In writing thereport,the auditors must choose proper wording to statethat no financial audit was performed,that the procedureswere limited in scope and that the results reported do notnecessarily include all the inefficiencies that might exist.1-23 a.The CPA firm for the Internet company described in this problem could address these customer concerns by performinga WebTrust attestation engagement.The WebTrust assuranceservice was created by the profession to respond to thegrowing need for assurance resulting from the growth ofbusiness transacted over the Internet.b.The appropriate WebTrust principle for each of the customerconcerns noted in the problem is as follows:1.Accuracy of product descriptions and adherence tostated return policies: (3) Processing Integrity.2.Credit card and other personal information: (1)Online Privacy and (2) Security.3.Selling information to other companies: (1) Online Privacy and(2) Security.4.System failure: (4) Availability.Internet Problem Solution: Assurance Services1-1 This problem requires students to work with the AICPA assurance services Web site.1.Considering the assurance needs of customers and thecapabilities of CPAs, the Special Committee on AssuranceServices developed business plans for six assurance services.Chapter 1of the textbook discussed several of theseservices.Go to the service description for the assuranceservice that most interests you (any one of the six). Whatare the major aspects or sections of the associatedbusiness plan ., does the plan address market potential,competition, etc.?)Answer: Each business plan provides background information,describes the service, assesses market potential, discussesissues such as competition and why CPAs should offer the service,identifies practice tools available and steps that CPAs must take tobegin offering the services.2.The Special Committee's report on Assurance Services discussescompetencies needed by assurance providers todayand in the coming decade.Briefly describe the 5 generalcompetencies needed in the next decade (Hint:See the“About Assurance Services ”link.Then follow the“Assurance Services and Academia” link.)Answer: The Committee identified the following five imperatives regarding future competencies, each of implies increasing emphasis on the competencies noted:major which1-1(continued)Customer focus .Assurance service providers need tounderstand user decision processes and how informationshould enter into those processes.Increased emphasis isneeded on:understanding user needs,communication skills,relationship management, responsiveness and timeliness.Migration to higher value-added information activities.Toprovide more value to client/decision makers and others,assurance service providers need to focus less on activitiesinvolved in the conversion of business events intoinformation.,collecting,classifying,and summarizingactivities)and more on activities involved in thetransformation of information into knowledge .,analyzing,interpreting,and evaluating activities)that effectivelydrives decision processes.This will require:analyticalskills, business advisory skills, business knowledge, modelbuilding (including sensitivity analysis), understanding theclient’s business processes,measurement theory(development of operational definitions of concepts, designof appropriate measurement techniques, etc.).Information technology(IT).Assurance services deal ininformation.Hence,the profound changes occurring ininformation technology will shape virtually all aspects ofassurance services.As information specialists,assuranceservice providers need to embrace information technology inall of its complex dimensions.Embracing IT meansunderstanding how it is transforming all aspects of business.It also means learning how to effectively use newdevelopments in hardware, software, communications, memory,encryption, etc., in everything assurance service providersdo as information specialists,not only in dealing withclients, but also in dealing with each other as individuals,teams,firms,state societies,and national professionalorganizations.Pace of change and complexity.Assurance services will takeplace in an environment of rapid change and increasingcomplexity.Assurance service providers need to investheavily in life-long learning in order to maintain up-to-date knowledge and skills.They will require:intellectualcapability, learning and rejuvenation.Competition.Growth in new assurance services will dependless on franchise/regulation and more on market forces.Assurance service providers need to develop their marketingskills—the ability to see clients ’ latent informationand assurance needs and rapidly design and deploy cost-effective services to meet those needs—in order toeffectively compete for market-driven assurance services.Required skills include:marketing and selling,understanding customer needs,designing and deployingeffective solutions.1-1(continued)( Note: Internet problems address current issues using Internet Because Internet sites are subject to change, Internet problems and solutionsare subject to change.Current information on Internet problems is atsources. available。

审计学一种整合方法

审计学一种整合方法
审计学是一种监控，审核，检测，报告和修复系统性问题的过程。

它可以帮助改善机构的系统，运行，管理，控制和安全等方面，其最终目的是确保企业资金和资产物有效利用，以及改善其绩效。

在实践中，审计有两个重要组成部分：系统审计和控制审计。

系统审计是一种根据审计标准，采用有系统的方法，进行检查和确认评估的过程，它的目的是为了确保企业的投资和管理是有效的，资源能够按预定的方式得到有效的利用。

通过系统审计，可以及时发现存在的不规范行为，从而保护企业的商业秘密，财务报表的真实性和完整性，以及满足外部要求。

控制审计是一种历史性的审计技术，它是一种更加完整和全面的审计方法，致力于识别和改进组织各类风险。

控制审计的本质是对组织内部控制进行评估，以识别潜在风险及时作出调整，从而确保企业增值.控制审计涉及对企业组织架构的评估，包括组织设计（组织职能，责任，权限和管理制度），财务控制，技术系统，信息系统，安全制度和操作流程等。

审计学的一种整合方法是“螺旋审计”，它是一种综合的审计方法。

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Auditing and Assurance Services, 15e (Arens)Chapter 9 Materiality and RiskLearning Objective 9-11) If it is probable that the judgment of a reasonable person will be changed or influenced by the omission or misstatement of information, then that information is, by definition of FASB Statement No. 2:A) material.B) insignificant.C) significant.D) relevant.Answer: ATerms: FASB Statement No. 2; Probable judgment of a reasonable personDiff: EasyObjective: LO 9-1AACSB: Reflective thinking skills2) The scope paragraph of the standard unqualified auditor's report states that "… the standards require that we plan and perform the audit to obtain ________ assurance about whether the financial statements are free of material misstatement." What type of assurance is given?A) ImmediateB) LimitedC) ReasonableD) AbsoluteAnswer: CTerms: Type of assurance providedDiff: EasyObjective: LO 9-1AACSB: Reflective thinking skills3) Auditors are responsible for determining whether financial statements are materially misstated, so upon discovering a material misstatement they must bring it to the attention of:A) regulators.B) the audit firm's managing partner.C) the client shareholders.D) the client.Answer: DTerms: Discovery of a material misstatement must bring it to the attentionDiff: EasyObjective: LO 9-1AACSB: Reflective thinking skills4) Determining materiality requires professional judgment.Answer: TRUETerms: MaterialityDiff: EasyObjective: LO 9-1AACSB: Reflective thinking skillsLearning Objective 9-21) Audit standards require the auditor to consider materiality early in the audit. Which statement(s) regarding preliminary materiality are true?I. Preliminary materiality may change during the engagement.II. Preliminary materiality is the maximum amount by which the auditor believes the financials could be misstated and still not affect the decisions of reasonable users.A) I onlyB) II onlyC) both I and IID) neither are trueAnswer: CTerms: Preliminary materiality assessmentDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills2) Why do auditors establish a preliminary judgment about materiality?A) To determine the appropriate level of staff to assign to the auditB) So that the client can know what records to make available to the auditorC) To help plan the appropriate evidence to accumulateD) To finalize the control risk assessmentAnswer: CTerms: Purpose to establish preliminary judgment about materialityDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills3) If an auditor establishes a relatively high level for materiality, then the auditor will:A) accumulate more evidence than if a lower level had been set.B) accumulate less evidence than if a lower level had been set.C) accumulate approximately the same evidence as would be the case were materiality lower.D) accumulate an undetermined amount of evidence.Answer: BTerms: High level for materialityDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills4) The preliminary judgment about materiality and the amount of audit evidence accumulated are________ related.A) directlyB) indirectlyC) notD) inverselyAnswer: DTerms: Preliminary judgment about materiality and amount of evidence accumulatedDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills5) Which of the following is the primary basis used to decide materiality for a for-profit entity?A) Net salesB) Net assetsC) Net income before taxD) All of the aboveAnswer: CTerms: Primary basis to decide materiality for a for-profit entityDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills6) Auditing standards ________ that the basis used to determine the preliminary judgment about materiality be documented in the audit files.A) permitB) do not allowC) requireD) strongly encourageAnswer: CTerms: Auditing standards; Preliminary judgment about materiality documentedDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills7) Amounts involving fraud are usually considered ________ important than unintentional errors of equal dollar amounts.A) lessB) no lessC) no moreD) moreAnswer: DTerms: Amounts involving fraudDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills8) Qualitative factors can affect an auditor's assessment of materiality. Which of the following statements is true?I. Misstatements that are otherwise immaterial may be material if they affect earnings trends.II. Misstatements that are otherwise minor may be material if there are possible consequences arising from contractual obligations.A) I onlyB) II onlyC) I and IID) neither I nor IIAnswer: CTerms: Qualitative factors can affect auditor's assessment of materialityDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills9) The five steps in applying materiality are listed below in random order.1. Estimate the combined misstatement.2. Estimate the total misstatement in the segment.3. Set materiality for the financial statements as a whole.4. Determine performance materiality.5. Compare combined estimate with preliminary judgment about materiality.The first three steps in correct sequence would be:A) 1, 2, 5B) 3, 4, 2C) 2, 1, 5D) 3, 2, 4Answer: BTerms: Five steps in applying materialityDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills10) Which of the following statements is not correct?A) Materiality is a relative rather than an absolute concept.B) The most important base used as the criterion for deciding materiality is total assets.C) Qualitative factors as well as quantitative factors affect materiality.D) Given equal dollar amounts, frauds are usually considered more important than errors. Answer: BTerms: MaterialityDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills11) Certain types of misstatements are likely to be more important than other types to users, even if the dollar amounts are the same. Which of the following demonstrates this?Answer: ATerms: Certain types of misstatements are likely more important than other typesDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills12) When setting a preliminary judgment about materiality:A) more evidence is required for a low dollar amount than for a high dollar amount.B) less evidence is required for a low dollar amount than for a high dollar amount.C) the same amount of evidence is required for either low or high dollar amounts.D) there is no relationship between it and the dollar amount of evidence needed.Answer: ATerms: Setting preliminary judgment about materialityDiff: ChallengingObjective: LO 9-2AACSB: Reflective thinking skills13) Lewis Corporation has a few large accounts receivable that total one million dollars whereasClark Corporation has many small accounts receivable that total one million dollars. Misstatement in any one account is more significant for Lewis corporation because of the concept of:A) materiality.B) audit risk.C) reasonable assurance.D) comparative analysis.Answer: ATerms: MisstatementsDiff: ChallengingObjective: LO 9-2AACSB: Reflective thinking skills14) Audit standards require the auditor to consider the combined amount of misstatement early in the audit. This is known as preliminary materiality judgment. List and discuss the three main factors that affect an auditor's preliminary judgment about materiality.Answer: The three main factors that affect an auditor's judgment about materiality are:•Materiality is a relative rather than an absolute concept. A misstatement of a given size might be material for a small company, whereas the same dollar misstatement could be immaterial for a larger one. •Benchmarks are needed for evaluating materiality. Because materiality is relative, it is necessary to have benchmarks for establishing whether misstatements are material. Net income before taxes is normally the most commonly used benchmark, but other possible benchmarks include current assets, total assets, current liabilities, and owners' equity.•Qualitative factors also affect materiality. Certain types of misstatements are likely to be more important to users than others, even if the dollar amounts are the same, such as misstatements involving frauds. Terms: Factors that affect auditor's preliminary judgmentDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills15) Due to qualitative factors, certain types of misstatements are likely to be more important to users than others, even if the dollar amounts are the same. Identify two qualitative factors that might significantly affect an auditor's materiality judgment, and give an example of each.Answer: Qualitative factors that affect an auditor's materiality judgment include:•Amounts involving fraud. Amounts involving fraud are usually considered more important than unintentional errors of equal dollar amounts because fraud reflects on the honesty and reliability of the management or other personnel involved. For example, an intentional misstatement of inventory would be more important to users than a clerical error in inventory of the same amount.•Misstatements affecting contractual obligations. Misstatements that are otherwise minor may be material if there are possible consequences arising from contractual obligations. For example, if a misstatement causes a required minimum account balance to exceed the minimum, when the correct balance is less than the minimum, this misstatement likely would be important to users.•Amounts affecting a trend in earnings. Amounts that are otherwise immaterial may be material if they affect a trend in earnings. An example is if reported income has increased 3 percent annually for the past five years but income for the current year has declined 1 percent, that change may be material. Similarly, a misstatement that would cause a loss to be reported as a profit may be of concern.Terms: Qualitative factors that affect auditor's materiality judgmentDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills16) The auditor's preliminary judgment about materiality is the maximum amount by which the auditor believes the financial statements could be misstated and still not affect the decisions of reasonable users. Answer: TRUETerms: Preliminary judgments about materialityDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills17) Preliminary judgments about materiality are often changed during the course of the engagement. Answer: TRUETerms: Preliminary judgments about materialityDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills18) Net assets are the most often used base for deciding materiality.Answer: FALSETerms: Base for deciding materialityDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills19) The lower the dollar amount of the preliminary judgment the more audit evidence is required. Answer: TRUETerms: Amount of preliminary judgment and audit evidence requiredDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills20) Amounts involving fraud are not usually considered qualitative factors affecting the preliminary materiality judgment.Answer: FALSETerms: Qualitative factors affecting preliminary materiality judgment; FraudDiff: EasyObjective: LO 9-2AACSB: Reflective thinking skills21) CPA firms can establish policy guidelines to help their auditors determine materiality.Answer: TRUETerms: Difficulty in applying concept of materialityDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills22) Statements on Auditing Standards provide detailed, objective guidance on how auditors are to establish a preliminary materiality level, thus eliminating the need for subjective auditor judgment in this task.Answer: FALSETerms: Statements on Auditing Standards; Objective guidance on establishing preliminary materiality levelDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills23) If the preliminary judgment of materiality increases, the amount of audit evidence required will decrease.Answer: TRUETerms: Preliminary judgment of materiality and audit evidenceDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skills24) Net income before tax is the normal base used to determine materiality in a not-for-profit company. Answer: FALSETerms: Base used to determine materialityDiff: ModerateObjective: LO 9-2AACSB: Reflective thinking skillsLearning Objective 9-31) When auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance is referred to as:A) the materiality range.B) the error range.C) tolerable materiality.D) performance materiality.Answer: DTerms: Allocate preliminary judgment about materiality to account balancesDiff: EasyObjective: LO 9-3AACSB: Reflective thinking skills2) Auditors generally allocate the preliminary judgment about materiality to the:A) balance sheet only.B) income statement only.C) income statement and balance sheet.D) statement of cash flows.Answer: ATerms: Preliminary materiality allocationDiff: EasyObjective: LO 9-3AACSB: Reflective thinking skills3) Which of the following is an incorrect statement regarding the allocation of the preliminary judgment about materiality to balance sheet accounts?A) Auditors expect certain accounts to have more misstatements than others.B) The allocation has virtually no effect on audit costs because the auditor must collect sufficient appropriate audit evidence.C) Auditors expect to identify overstatements as well as understatements in the accounts.D) Relative audit costs affect the allocation.Answer: BTerms: Allocation of preliminary judgment about materialityDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills4) Which of the following statements is true concerning the allocation of preliminary materiality?A) It is necessary to allocate preliminary materiality to financial statements as a whole rather than by segments.B) Preliminary materiality should be allocated to income statement accounts only.C) Preliminary materiality is required by the SEC.D) The PCAOB term used when preliminary materiality is allocated to segments is tolerable misstatement.Answer: DTerms: Allocation of preliminary materialityDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills5) Which of the following statements is false?A) Either an overstatement of an asset account or an understatement of a liability account would have the same effect on the income statement.B) A misclassification in the balance sheet will have no effect on operating income.C) Either an overstatement of an asset account or an overstatement of a liability account would have the same effect on the income statement.D) Either an understatement of an asset account or an overstatement of a liability account would have the same effect on the income statement.Answer: CTerms: Effects of misstatementsDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills6) Which of the following are major difficulties auditors face when allocating materiality to balance sheet accounts?Answer: ATerms: Major difficulties auditors face when allocating materiality to balance sheet accountsDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills7) When allocating performance materiality:A) it is easy to predict in advance which accounts are mot likely to be misstated.B) only overstatements need to be considered.C) professional judgment is critical.D) the sum of all the performance materiality levels cannot exceed the preliminary judgment about materiality.Answer: CTerms: Major difficulties auditors face when allocating materiality to balance sheet accountsDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills8) When allocating materiality, most practitioners choose to allocate to:A) the income statement accounts because they are more important.B) the balance sheet accounts because most audits focus on the balance sheet.C) both balance sheet and income statement accounts because there could be errors on either.D) all of the financial statements because it is required by GAAS.Answer: BTerms: Allocating materialityDiff: ChallengingObjective: LO 9-3AACSB: Reflective thinking skills9) Which of the following is a correct statement regarding performance materiality?A) Determining performance materiality is necessary because auditors accumulate evidence by segments.B) The level of performance materiality does not affect the amount of evidence needed.C) Performance materiality cannot vary for different classes of transactions.D) Performance materiality is required for public companies, but not for private companies.Answer: ATerms: Tolerable misstatementsDiff: ChallengingObjective: LO 9-3AACSB: Reflective thinking skills10) Explain why it is necessary to allocate the preliminary judgment about materiality to individual accounts (segments) in the financial statements. Also explain why allocating to balance sheet accounts is more common than allocating to income statement accounts.Answer: Allocating the preliminary judgment about materiality to individual accounts (segments) is necessary because evidence is accumulated for accounts (segments) rather than for the financial statements as a whole. Allocating to accounts (segments) establishes a tolerable misstatement amount for each account, which helps the auditor decide the appropriate audit evidence to accumulate for each account. Most practitioners allocate materiality to balance sheet accounts rather than income statement accounts because most income statement misstatements have an equal effect on the balance sheet due to the nature of double-entry accounting. Because there are fewer balance sheet accounts than income statement accounts in most audits, and because most audit procedures focus on balance sheet accounts, materiality should be allocated only to balance sheet accounts.Terms: Allocation of the preliminary judgment about materialityDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills11) Auditor's allocate the preliminary judgment about materiality to financial statement segments rather than by financial statements as a whole. What is the term for the auditor's allocation of preliminary misstatement to account balances? What are three difficulties auditor's face when allocating materiality to balance sheet accounts?Answer: Performance materiality is the term for the auditor's allocation of the preliminary judgment of materiality to any given account balance. The three difficulties auditors face when allocating the preliminary materiality to account balances are:1. Auditors expect certain accounts to have more misstatement than others.2. Both overstatements and understatements must be considered.3. Audit costs can affect the allocation.Terms: Allocation of preliminary misstatement to account balances and difficulties that auditors face allocating preliminary materiality judgment to account balancesDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills12) Most practitioners allocate the preliminary judgment about materiality to both the balance sheet and income statement accounts.Answer: FALSETerms: Allocate preliminary judgment about materiality to balance sheet accountsDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills13) The primary purpose of allocating the preliminary judgment about materiality to financial statement accounts is to help the auditor decide the appropriate evidence to accumulate.Answer: TRUETerms: Primary purpose of allocating the preliminary judgment about materialityDiff: EasyObjective: LO 9-3AACSB: Reflective thinking skills14) Both overstatements and understatements must be considered when allocating materiality to balance sheet accounts.Answer: TRUETerms: Allocating materiality; Consideration of overstatements and understatementsDiff: EasyObjective: LO 9-3AACSB: Reflective thinking skills15) If an auditor assigns a tolerable misstatement of $1,000 to accounts payable, he or she would need to obtain more audit evidence for that account than if $100,000 had been assigned.Answer: TRUETerms: Tolerable misstatements and audit evidenceDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skills16) To maximize audit efficiency, the auditor should allocate less tolerable misstatement to accounts that can be verified by using low-cost audit procedures, such as analytical procedures, than to accounts that are more costly to audit.Answer: TRUETerms: Maximize audit efficiency, allocate less tolerable misstatementsDiff: ModerateObjective: LO 9-3AACSB: Reflective thinking skillsLearning Objective 9-41) Auditors are ________ to document the known and likely misstatements in the financial statements under audit.A) permittedB) requiredC) not allowedD) strongly encouragedAnswer: BTerms: Known and likely misstatements in the financial statementsDiff: EasyObjective: LO 9-4AACSB: Reflective thinking skills2) ________ misstatements are those where the auditor can determine the amount of the misstatement in the account.A) PotentialB) LikelyC) KnownD) ProjectedAnswer: CTerms: Misstatements where auditor can determine the amountDiff: ModerateObjective: LO 9-4AACSB: Reflective thinking skills3) Likely misstatements can result from:Answer: ATerms: Likely misstatements result fromDiff: ModerateObjective: LO 9-4AACSB: Reflective thinking skills4) When evaluating the audit findings, the auditor should be satisfied that the:A) amount of known misstatement is documented in the management representation letter.B) estimate of the total known and likely misstatements is less than a material amount.C) estimate of the total likely misstatement includes sample error.D) amount of known misstatement is acknowledged and recorded by the client. Answer: BTerms: Evaluating audit findings and materialityDiff: ChallengingObjective: LO 9-4AACSB: Reflective thinking skills5) Discuss each of the five steps in applying materiality in an audit, and identify the audit phase(s) in which each step is performed. List these steps in the order in which they occur.Answer: Step 1. Set preliminary judgment about materiality. This is the combined amount of misstatements in the financial statements that would be considered material. This decision is made in the planning stage of the audit.Step 2. Allocate preliminary judgment about materiality to segments. In this step, the auditor normally allocates the preliminary judgment about materiality to the balance sheet accounts. The amount of materiality allocated to an account is referred to as that account's performance materiality. This allocation is performed in the audit planning stage.Step 3. Estimate total misstatement in segment. In this step, the auditor projects the sample results to the population. An allowance for sampling risk is also calculated. This would be performed after the substantive tests for each account are completed.Step 4. Estimate the combined misstatement. In this step, the projected errors for each account are added, along with total sampling error, to calculate the combined misstatement. This would be performed after all substantive tests have been completed.Step 5. Compare combined estimated misstatement with preliminary or revised judgment about materiality. If the combined estimated misstatement is less than or equal to the judgment about materiality, then the auditor concludes the financial statements are fairly presented. This would be performed after all substantive tests have been completed, in the final review stage of the audit.Terms: Five steps in applying materiality in auditDiff: ChallengingObjective: LO 9-2, LO 9-3, and LO 9-4AACSB: Reflective thinking skills6) The preliminary judgment on materiality is compared to the total estimated misstatement amount to determine if an account balance is materially misstated.Answer: TRUETerms: Preliminary judgment on materiality; Estimated total misstatementsDiff: ModerateObjective: LO 9-4AACSB: Reflective thinking skills7) Total estimated misstatements include known misstatements and projected misstatements plus a sampling error.Answer: TRUETerms: Total estimated misstatements and sampling errorDiff: ModerateObjective: LO 9-4AACSB: Reflective thinking skills8) If the total misstatement of an account is known, a sampling error still needs to be determined. Answer: FALSETerms: Total estimated misstatements and sampling errorDiff: ModerateObjective: LO 9-4AACSB: Reflective thinking skills9) Sampling error represents the minimum misstatement amount that exists in all accounts subjected to sampling.Answer: FALSETerms: Total estimated misstatements and sampling errorDiff: ModerateObjective: LO 9-4AACSB: Reflective thinking skills10) If the auditor approaches the audit of the accounts in s sequential manner, the findings of the audit of accounts audited earlier can be used to revise the performance materiality established for accounts audited later.Answer: TRUETerms: Total estimated misstatements and sampling errorDiff: ModerateObjective: LO 9-4AACSB: Reflective thinking skillsLearning Objective 9-51) Which of the following audit risk components may be assessed in non-quantitative terms?Answer: ATerms: Audit risk components assessed in non-quantitative termsDiff: EasyObjective: LO 9-5AACSB: Reflective thinking skills2) Based on audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would:A) increase materiality levels.B) decrease detection risk.C) decrease substantive testing.D) increase inherent risk.Answer: BTerms: Control risk and planned audit risk modelDiff: ChallengingObjective: LO 9-5AACSB: Reflective thinking skills3) When dealing with audit risk:A) auditors accept some level of risk in performing the audit function.B) most risks that auditors encounter are relatively easy to measure.C) the audit risk model is only used for classes of transactions.D) most audit firms prefer to use a quantitative assessment for risk.Answer: ATerms: Audit riskDiff: ModerateObjective: LO 9-2 and LO 9-5AACSB: Reflective thinking skills4) Why do auditors use the audit risk model when planning an audit?Answer: The audit risk model is used primarily for planning purposes in deciding how much evidence to accumulate in each cycle. The auditor sets an acceptable level of audit risk, (AAR) assesses inherent risk (IR) and control risk (CR), and then uses the following audit risk model to determine an appropriate level of planned detection risk (PDR):PDR =Terms: Audit risk modelDiff: EasyObjective: LO 9-5AACSB: Reflective thinking skills5) The most important element of the audit risk model is control risk.Answer: FALSETerms: Audit risk model and control riskDiff: EasyObjective: LO 9-5AACSB: Reflective thinking skills。