审计学一种整合的方法
审计学-一种整合的方法
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6 - 18
Balance and Transactions Affecting Balances Example
6 - 13
Financial Statements Cycles
Audits are performed by dividing the financial statements into smaller segments or components.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
reporting versus misappropriation of assets
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6 - 10
Auditor’s Responsibilities for Discovering Illegal Acts
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6 - 11
Auditor’s Responsibilities for Discovering Illegal Acts
Evidence accumulation and other actions when there is reason to believe direct- or indirect-effect illegal acts may exist
审计学：一种整合方法(14)学习笔记
所有者权益审计目标股本和相关股利的内控是否充分；所有者权益交易是否均正确记录，复核六项与交易相关的审计目标；所有者权益账户余额是否均已适当的记录，复核八个与余额相关的审计目标内部控制交易的恰当授权：由董事会批准。
如：股票发行、股票回购、股利宣告。
正确的记录和职责分离：记录实际的股票持有着，以确保向其方法股利；股利支付支票由不股本审计所有发生的股本交易均已记录（完整）：如果聘请了证券登记代理商、股票会议记录，特别是接近报表日的会议记录；审查股票登记簿；所有记录的都确实发生且记录准确（发生、准确）：对所有的交易进行验证金收入日记账，确认会计记录是否正确；根据公司章程确定的股票面值的规定，确认股本溢股本记录准确:向股票过户代理机构函证确认资产负债表日发行在外的股份数；或审查股票记录股本已恰当地表达与披露股利审计：重点：交易审计；而非余额审计；如果有应付股利，则例外。
1、存在性审查董事会会议记录来确定每股股利和股利宣告的授权；关注已2、准确性每股股利与流通在外的股数的乘积计算已宣告鼓励的金额；如果如果自己制作股利并发放，通过重新计算和审阅现金支出记录来验证股利金额从股利支付中选取一个样本，将支票上的收款人姓名追查至股东记录，以确信收款人具有股计目标票回购、股利宣告。
其方法股利；股利支付支票由不负责股本记录的雇员填写；并对股东姓名和支票金额独立核对。
外的股份数；或审查股票记录和股权登记证明登记簿中所有流通在外的股票的会计记录；然后乘以面值来验证股本账户中记录授权；关注已宣告还未发放的股利；的金额；如果通过代理人发放，追查股利至向代理人支付现金的分录，同时进行函证；录来验证股利金额股东记录，以确信收款人具有股东资格；、股票过户代理机构，则向其函证股本交易是否发生、发生的交易记录是否准确；复核董事会；行验证：验证董事会会议记录，相关业务是否得到授权？向股票过户代理机构函证；追查至现的股票面值的规定，确认股本溢价金额是否正确。
审计学-一种整合的方法
Steps to Develop Audit Objectives
•4. Know general audit objectives for • classes of transactions and accounts.
•5. Know specific audit objectives for • classes of transactions and accounts.
➢ Actions when the auditor knows of an illegal act
Learning Objective 4
Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit.
Auditor’s Responsibilities for Discovering Illegal Acts
➢ Evidence accumulation and other actions • when there is reason to believe direct- or • indirect-effect illegal acts may exist
•The Sarbanes-Oxley Act provides for criminal •penalties for anyone who knowingly falsely •certifies the statements.
Learning Objective 3
Explain the auditor’s responsibility for discovering material misstatements.
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
审计学一种整合的方法
审计学是一种整合的方法，它涵盖了许多不同的领域，包括会计、财务、风险管理、法律和管理。
审计学的目标是通过评估一个组织或实体的财务报表和内部控制体系来提供可靠的信息，以帮助管理者和利益相关者做出决策。
审计学的整合方法包括对财务报表的审计，内部控制的评价和测试，风险管理的审计，以及合规性审计等。
通过这些方法，审计学能够帮助组织发现问题并提供解决方案，从而提高组织的运营效率和财务稳定性。
审计学也涉及到对法律法规的遵守情况的评估，以及对组织的治理结构和业务运作的审计。
通过整合不同领域的方法和技术，审计学能够提供全面的评估和建议，以帮助组织达到其经营和财务目标。
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。
审计学 一种整合方法 Auditingand Assurance Services An integrated approach Test Bank chapter 9
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。
阿伦斯 审计学：一种整合方法 课后习题答案ch01
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 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 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 strategicsystems 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 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 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 reduced information risk, the interest rate is lowest for the loan with the audit report.b.Given these circumstances, Vial-tek should select the loanfrom City First Bank that requires an annual audit. In this situation, the additional cost of the audit is less than the reduction in interest due to lower information risk. The following 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 Union are valued because Consumers Union is independent of the products tested.b.The concepts of information risk for the buyer of anautomobile and for 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 samefor a buyer of an automobile and a user of financial statements:(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 similarautomobile.(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 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 which the auditor is concerned.(2)There are four established criteria which must beevaluated and reported by Virms: existence of the trucks on the night of June 30, 2005, ownership of each truck by Regional Delivery Service, physical condition of each truck and fair market value of each truck.(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: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 state that no financial audit was performed, that the procedures were limited in scope and that the results reported do not necessarily 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. To provide more value to client/decision makers and others, assurance service providers need to focus less on activities involved in the conversion of business events into information ., collecting, classifying, and summarizing activities) and more on activities involved in the transformation of information into knowledge ., analyzing, interpreting, and evaluating activities) that effectively drives decision processes. This will require: analytical skills, business advisory skills, business knowledge, model building (including sensitivity analysis), understanding the client’s business processes, measurement theory (development of operational definitions of concepts, design of appropriate measurement techniques, etc.).Information technology (IT).Assurance services deal in information. Hence, the profound changes occurring in information technology will shape virtually all aspects of assurance services. As information specialists, assurance service providers need to embrace information technology in all of its complex dimensions. Embracing IT means understanding how it is transforming all aspects of business. It also means learning how to effectively use new developments in hardware, software, communications, memory, encryption, etc., in everything assurance service providers do as information specialists, not only in dealing with clients, 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。
审计学-一种整合的方法43页PPT
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56、书不仅是生活，而且是现在、过 去和未 来文化 生活的 源泉。 ——库 法耶夫 57、生命不可能有两次，但许多人连一 次也不 善于度 过。— —吕凯 特 58、问渠哪得清如许，为有源头活水来 。—— 朱熹 59、我的努力求学没有得到别的好处， 只不过 是愈来 愈发觉 自己的 无知。 ——笛 卡儿
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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-一种整合的方法
2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
8 - 15
Management and Governance
Management establishes the strategies and processes followed by the client's business. Governance includes the client's organizational structure, as well as the activities of the board of directors and the audit committee. Corporate charter and bylaws Code of ethics Meeting minutes
2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
8-5
Planning an Audit and Designing an Audit Approach
Set materiality and assess acceptable audit risk and inherent risk. Understand internal control and assess control risk. Gather information to assess fraud risks. Develop overall audit plan and audit program.
2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
审计学 一种整合方法 Auditingand Assurance Services An integrated approach Test Bank chapter 6
Auditing and Assurance Services, 15e (Arens)Chapter 6 Audit Responsibilities and ObjectivesLearning Objective 6-11) The objective of an audit of the financial statements is an expression of an opinion on:A) the fairness of the financial statements in all material respects.B) the accuracy of the financial statements.C) the accuracy of the annual report.D) the accuracy of the balance sheet and income statement.Answer: ATerms: Objective of ordinary audit of financial statementsDiff: EasyObjective: LO 6-1AACSB: Reflective thinking skills2) If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor:A) should withdraw from the engagement.B) should request an increase in audit fees so that more resources can be used to conduct the audit.C) has the responsibility of notifying financial statement users through the auditor's report.D) should notify regulators of the circumstances.Answer: CTerms: Auditor believes that financial statements are nor fairly presentedDiff: EasyObjective: LO 6-1AACSB: Reflective thinking skills3) Auditors accumulate evidence to:A) defend themselves in the event of a lawsuit.B) determine if the financial statements are correct.C) satisfy the requirements of the Securities Acts of 1933 and 1934.D) reach a conclusion about the fairness of the financial statements.Answer: DTerms: Auditors accumulate evidenceDiff: EasyObjective: LO 6-1AACSB: Reflective thinking skillsLearning Objective 6-21) The responsibility for adopting sound accounting policies and maintaining adequate internal control rests with the:A) board of directors.B) company management.C) financial statement auditor.D) company's internal audit department.Answer: BTerms: Responsibility for adopting sound accounting policies and maintaining adequate internal controlsDiff: EasyObjective: LO 6-2AACSB: Reflective thinking skills2) If management insists on financial statement disclosures that the auditor finds unacceptable, the auditor can withdraw from the engagement or:Terms: Auditor insists on financial statement disclosures that management finds unacceptableDiff: EasyObjective: LO 6-2AACSB: Reflective thinking skills3) In certifying their annual financial statements, the CEO and CFO of a public company certify that the financial statements comply with the requirements of:A) GAAP.B) the Sarbanes-Oxley Act.C) the Securities Exchange Act of 1934.D) GAAS.Answer: CTerms: Certifying annual financial statements by CEO and CFODiff: EasyObjective: LO 6-2AACSB: Reflective thinking skillsTopic: Public4) Which of the following statements is true of a public company's financial statements?A) Sarbanes-Oxley requires the CEO only to certify the financial statements.B) Sarbanes-Oxley requires the CFO only to certify the financial statements.C) Sarbanes-Oxley requires the CEO and CFO to certify the financial statements.D) Sarbanes-Oxley requires neither the CEO nor the CFO to certify the financial statements.Answer: CTerms: Public company's financial statementsDiff: EasyObjective: LO 6-2AACSB: Reflective thinking skillsTopic: SOX5) The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to:A) the auditor.B) management.C) both management and the auditor equally.D) management for the statements and the auditor for the notes.Answer: BTerms: Responsibility for preparation of the financial statements and the accompanying footnotesDiff: ModerateObjective: LO 6-2AACSB: Reflective thinking skills6) Because they operate the business on a daily basis, a company's management knows more about the company's transactions and related assets, liabilities, and equity than the auditors.Answer: TRUETerms: Responsibility for fair presentation of financial statementsDiff: EasyObjective: LO 6-2AACSB: Reflective thinking skills7) The annual reports of many public companies include a statement about management's responsibilities and relationship with the CPA firm.Answer: TRUETerms: Management's responsibility and relationship with CPA firmDiff: EasyObjective: LO 6-2AACSB: Reflective thinking skills8) The auditors determine which disclosures must be presented in the financial statements.Answer: FALSETerms: Responsibility for fair presentation of financial statementsDiff: EasyObjective: LO 6-2AACSB: Reflective thinking skillsLearning Objective 6-31) The auditor's best defense when material misstatements are not uncovered is to have conducted the audit:A) in accordance with generally accepted auditing standards.B) as effectively as reasonably possible.C) in a timely manner.D) only after an adequate investigation of the management team.Answer: ATerms: Auditors' best defense when material misstatements are not uncoveredDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills2) An audit must be performed with an attitude of professional skepticism. Professional skepticism consists of two primary components: a questioning mind and:A) the assumption that upper-level management is dishonest.B) a critical assessment of the audit evidence.C) the assumption that all employees are motivated by greed.D) verification of all critical information by independent third parties.Answer: BTerms: Attitude of professional skepticismDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills3) Which of the following is not one of the reasons that auditors provide only reasonable assurance on the financial statements?A) The auditor commonly examines a sample, rather than the entire population of transactions.B) Accounting presentations contain complex estimates which involve uncertainty.C) Fraudulently prepared financial statements are often difficult to detect.D) Auditors believe that reasonable assurance is sufficient in the vast majority of cases.Answer: DTerms: Reasons auditors provide only reasonable assurance on financial statementsDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills4) Which of the following statements is the most correct regarding errors and fraud?A) An error is unintentional, whereas fraud is intentional.B) Frauds occur more often than errors in financial statements.C) Errors are always fraud and frauds are always errors.D) Auditors have more responsibility for finding fraud than errors.Answer: ATerms: Errors and fraudDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills5) When an auditor believes that an illegal act may have occurred, the auditor should first:A) obtain an understanding of the nature and circumstances of the act.B) consult with legal counsel or others knowledgeable about the illegal act.C) discuss the matter with the audit committee.D) withdraw from the engagement.Answer: ATerms: Auditor believes and illegal act may have occurredDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills6) The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not ________ are detected.A) important to the financial statementsB) statistically significant to the financial statementsC) material to the financial statementsD) identified by the clientAnswer: CTerms: Auditor has no responsibility to plan and perform audit to obtain reasonable assuranceDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills7) Fraudulent financial reporting is most likely to be committed by whom?A) Line employees of the companyB) Outside members of the company's board of directorsC) Company managementD) The company's auditorsAnswer: CTerms: Fraudulent financial reportingDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills8) Which of the following would most likely be deemed a direct-effect illegal act?A) Violation of federal employment lawsB) Violation of federal environmental regulationsC) Violation of federal income tax lawsD) Violation of civil rights lawsAnswer: CTerms: Direct-effect illegal actDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills9) The concept of reasonable assurance indicates that the auditor is:A) not a guarantor of the correctness of the financial statements.B) not responsible for the fairness of the financial statements.C) responsible only for issuing an opinion on the financial statements.D) responsible for finding all misstatements.Answer: ATerms: Concept of reasonable assuranceDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills10) Which of the following is the auditor least likely to do when aware of an illegal act?A) Discuss the matter with the client's legal counsel.B) Obtain evidence about the potential effect of the illegal act on the financial statements.C) Contact the local law enforcement officials regarding potential criminal wrongdoing.D) Consider the impact of the illegal act on the relationship with the company's management. Answer: CTerms: Illegal actsDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills11) An auditor discovers that the company's bookkeeper unintentionally made an mistake in calculating the amount of the quarterly sales. This is an example of:A) employee fraud.B) an error.C) misappropriation of assets.D) a defalcation.Answer: BTerms: Errors and fraudDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills12) The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes upon the auditor a duty to:A) provide reasonable assurance that material misstatements will be detected.B) be a guarantor of the fairness in the statements.C) be equally responsible with management for the preparation of the financial statements.D) be an insurer of the fairness in the statements.Answer: ATerms: Auditor responsibility for notifying users as to whether statements are properly statedDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills13) "The auditor should not assume that management is dishonest, but the possibility of dishonesty must be considered." This is an example of:A) unprofessional behavior.B) an attitude of professional skepticism.C) due diligence.D) a rule in the AICPA's Code of Professional Conduct.Answer: BTerms: Auditor should consider the possibility of dishonesty of managementDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills14) If the auditor were responsible for making certain that all of management's assertions in the financial statements were absolutely correct:A) bankruptcies could no longer occur.B) bankruptcies would be reduced to a very small number.C) audits would be much easier to complete.D) audits would not be economically practical.Answer: DTerms: Auditor responsible for making certain that all of management's assertions were absolutely correctDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills15) One of the characteristics of professional skepticism is ________, which is the conviction to decide for oneself, rather than accepting the claims of others.A) interpersonal understandingB) autonomyC) suspension of judgmentD) self-esteemAnswer: BTerms: Auditor's best defense when existing material misstatements in the financial statementsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills16) When dealing with laws and regulations that do not have a direct effect on the financial statements, the auditor:A) should inquire of management about whether the entity is in compliance with such laws and regulations.B) has no responsibility to determine if any violations of these laws has occurred.C) must report all violations, including inconsequential violations, to the audit committee.D) should perform the same procedures as for violations having a direct effect on the financial statements.Answer: ATerms: Indirect-effect illegal actsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills17) Which of the following statements is usually true?A) Materiality is easy to quantify.B) Fraudulent financial statements are often easy for the auditor to detect, especially when there is collusion among management.C) Reasonable assurance is a low level of assurance that the financial statements are free from material misstatement.D) An item is considered material if it would likely have changed or influenced the decisions of a reasonable person using the statements.Answer: DTerms: MaterialityDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills18) Auditing standards make ________ distinction(s) between the auditor's responsibilities for searching for errors and fraud.A) littleB) a significantC) noD) variousAnswer: CTerms: Auditor responsibility for searching for errors and fraudDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills19) In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is:A) greater for management fraud because managers are inherently more deceptive than employees.B) greater for management fraud because of management's ability to override existing internal controls.C) greater for employee fraud because of the higher crime rate among blue collar workers.D) greater for employee fraud because of the larger number of employees in the organization. Answer: BTerms: Management fraud vs. employee fraud and auditor failure to detect bothDiff: ChallengingObjective: LO 6-3AACSB: Reflective thinking skills20) Misappropriation of assets:A) is generally committed by company management.B) harms the users of the financial statements by providing them incorrect financial data for their decision making.C) causes harm to stockholders because the assets are no longer available to their rightful owners.D) causes the financial statements to be misstated since the misappropriation usually involves material amounts.Answer: CTerms: Misappropriation of assets fraudDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills21) When comparing the auditor's responsibility for detecting employee fraud and for detecting errors, the profession has placed the responsibility:A) more on discovering errors than employee fraud.B) more on discovering employee fraud than errors.C) equally on discovering errors and employee fraud.D) on the senior auditor for detecting errors and on the manager for detecting employee fraud. Answer: CTerms: Fraud and errorsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills22) If several employees collude to falsify documents, the chance a normal audit would uncover such acts is:A) very low.B) very high.C) zero.D) none of the above.Answer: ATerms: Employees collude to falsify documentsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills23) When planning the audit, if the auditor has no reason to believe that illegal acts exist, the auditor should:A) include audit procedures which have a strong probability of detecting illegal acts.B) still include some audit procedures designed specifically to uncover illegalities.C) ignore the issue.D) make inquiries of management regarding their policies for detecting and preventing illegal acts and regarding their knowledge of violations, and then rely on normal audit procedures to detect errors, irregularities, and illegalities.Answer: DTerms: Planning audit and illegal actsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills24) When the auditor identifies or suspects noncompliance with laws and regulations, the auditor:A) should discuss the matter with those whom they believe committed the illegal act.B) begin communication with the FASB in accordance with PCAOB regulations.C) may disclaim an opinion on the basis of scope limitations if he is precluded by management from obtaining sufficient appropriate evidence.D) should withdraw from the engagement.Answer: CTerms: Illegal acts occurredDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills25) When an auditor knows that an illegal act has occurred, she must:A) report it to the proper governmental authorities.B) consider the effects on the financial statements, including the adequacy of disclosure.C) withdraw from the engagement.D) issue an adverse opinion.Answer: BTerms: Auditor knows illegal act occurredDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skillsTopic: Public26) A questioning mindset:A) means the auditor must prove every statement that management makes to them.B) means the auditor should approach the audit with a "do not trust anyone" mental outlook.C) assures that the auditor will only accept honest clients.D) means the auditor should approach the audit with a "trust but verify" mental outlook.Answer: DTerms: Professional skepticismDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills27) Which of the following is an accurate statement concerning the auditor's responsibility to consider laws and regulations?A) Auditors can follow an easy, step-by-step procedure to determine how laws and regulations impact the financial statements.B) The auditor's responsibility will depend on whether the laws or regulations are expected to have a direct impact on the financial statements.C) It is the responsibility of the auditor to determine if an act constitutes noncompliance.D) The auditor must inform an outside party if management has knowingly not complied with a law or regulation.Answer: BTerms: Illegal acts effect on financial statementsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills28) Which of the following statements best describes the auditor's responsibility with respect to illegal acts that do not have a material effect on the client's financial statements?A) Generally, the auditor is under no obligation to notify parties other than personnel within the client's organization.B) Generally, the auditor is under an obligation to inform the PCAOB.C) Generally, the auditor is obligated to disclose the relevant facts in the auditor's report.D) Generally, the auditor is expected to compel the client to adhere to requirements of the Foreign Corrupt Practices Act.Answer: ATerms: Auditor responsibility with respect to illegal actsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills29) Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?A) The auditor is responsible for the failure to detect fraud only when such failure clearly results from nonperformance of audit procedures specifically described in the engagement letter.B) The auditor is required to provide reasonable assurance that the financial statements are free of both material errors and fraud.C) The auditor is responsible for detecting material financial statement fraud, but not a material misappropriation of assets.D) The auditor is responsible for the failure to detect fraud only when an unqualified opinion is issued. Answer: BTerms: Auditor responsibility regarding detection of fraudDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills30) The essence of the attest function is to:A) assure the consistent application of correct accounting procedures.B) determine whether the client's financial statements are fairly stated in accordance with an applicable financial reporting framework.C) examine individual transactions so that the auditor may certify as to their validity.D) detect collusion and fraud.Answer: BTerms: Essence of attest functionDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills31) The auditor's evaluation of the likelihood of material employee fraud is normally done initially as a part of:A) tests of controls.B) tests of transactions.C) understanding the entity's internal control.D) the assessment of whether to accept the audit engagement.Answer: CTerms: Evaluation of likelihood of material employee fraudDiff: ChallengingObjective: LO 6-3AACSB: Reflective thinking skills32) One of the characteristics of professional skepticism is_______, which is a desire to investigate beyond the obvious.A) self-esteemB) an interpersonal understandingC) a search for knowledgeD) a questioning mindsetAnswer: CTerms: Professional skepticismDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills33) Most illegal acts affect the financial statements:A) directly.B) only indirectly.C) both directly and indirectly.D) materially if direct; immaterially if indirect.Answer: BTerms: Illegal acts effect on financial statementsDiff: ChallengingObjective: LO 6-3AACSB: Reflective thinking skills34) If a client has violated federal tax laws:A) the auditor must notify the IRS.B) and the amount is significant, the auditor should communicate with those charged with governance.C) the noncompliance generally will not impact the financial statements.D) the auditor does not need to evaluate the effects of the noncompliance on other aspects of the audit. Answer: BTerms: Illegal acts effect on financial statementsDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills35) An auditor should recognize that the application of auditing procedures may produce evidence indicating the possibility of errors or fraud and therefore should:A) plan and perform the engagement with an attitude of professional skepticism.B) not rely on internal controls that are designed to prevent or detect errors or fraud.C) design audit tests to detect unrecorded transactions.D) extend the work to audit the majority of the recorded transactions and records of an entity. Answer: ATerms: Audit procedures that product evidence of errors or fraudDiff: ChallengingObjective: LO 6-3AACSB: Reflective thinking skills36) Discuss the differences between errors, frauds, and illegal acts. Give an example of each.Answer: The primary difference between errors and frauds is that errors are unintentional misstatements of the financial statements, whereas frauds are intentional misstatements. Illegal acts are violations of laws or government regulations, other than frauds. An example of an error is a mathematical mistake when footing the columns in the sales journal. An example of a fraud is the creation of fictitious accounts receivable. An example of an illegal act is the dumping of toxic waste in violation of the federal environmental protection laws.Terms: Errors, frauds, and illegal actsDiff: EasyObjective: LO 6-3AACSB: Reflective thinking skills37) Discuss the actions an auditor should take when an illegal act is identified or suspected.Answer: When an auditor discovers or suspects noncompliance with a law or regulation (illegal act), unless the matters involved are inconsequential, the auditor should:1. Consider the effects of the illegal act on the financial statements, including the adequacy of disclosures. If the auditor concludes that disclosures are inadequate, the auditor should express a qualified or adverse opinion on the financial statements. If the auditor is precluded by management or those charged with governance from obtaining sufficient appropriate evidence to evaluate whether noncompliance that may be material to the financial statements has occurred or is likely to have occurred, the auditor should express a qualified opinion or disclaim an opinion on the financial statements on the basis of the scope limitation.2. Communicate with those charged with governance matters involving noncompliance with laws and regulations that came to the auditor's attention during the course of the audit. If the matter is believed to be intentional and material, it should be communicated to those charged with governance, such as the board of directors, as soon as practicable.3. Identify whether a responsibility exists to report the identified or suspected noncompliance to parties outside the entity, such as regulatory authorities.4. Evaluate the effects of the noncompliance on other aspects of the audit, including the auditor's risk assessment and the reliability of other representations from management.Terms: Actions auditor should take when auditor discovers illegal actDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills38) Discuss three reasons why auditors are responsible for "reasonable" but not "absolute" assurance. Answer:•Most audit evidence results from testing a sample of a population. Sampling involves some risk of not uncovering material misstatements.•Accounting presentations contain complex estimates, which inherently involve uncertainty and can be affected by future events. As a result, the auditor has to rely on evidence that is persuasive but not convincing.•Fraudulently prepared financial statements are often very difficult for the auditor to detect, especially when there is collusion among management.Terms: Reasons auditors are responsible for reasonable but not absolute assuranceDiff: ModerateObjective: LO 6-3AACSB: Reflective thinking skills39) Discuss the differences in the auditor's responsibilities for discovering (1) material errors, (2) material fraud (3) illegal acts having a direct effect on the financial statements, and (4) illegal acts that do not have a direct effect on the financial statements.Answer: Auditing standards make no distinction between the auditor's responsibilities for searching for errors and fraud. In either case, the auditor must obtain reasonable assurance about whether the statements are free of material misstatements. The standards also recognize that fraud is often more difficult to detect because management or the employees perpetrating the fraud attempt to conceal the fraud. Still, the difficulty of detection does not change the auditor's responsibility to properly plan and perform the audit to detect material misstatements, whether caused by error or fraud.The auditor's responsibility for uncovering illegal acts that have a direct effect on the financial statements is the same as for errors and fraud. However, the auditor is not required to search for illegal acts that do not have a direct effect on the financial statements unless there is reason to believe they exist.Terms: Auditor responsibilities for discovering material errors, material fraud, direct-effect illegal acts, and indirect-effect illegal actsDiff: ChallengingObjective: LO 6-3AACSB: Reflective thinking skills。
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。
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6-8
Learning Objective 3
Explain the auditor’s responsibility for discovering material misstatements.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
2. Divide financial statements into cycles.
3. Know management assertions about accounts.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6-6
Management’s Responsibilities
Management is responsible for the financial statements and for internal control.
The Sarbanes-Oxley Act increases management’s responsibility for the financial statements.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6-5
Learning Objective 2
Distinguish management’s
responsibility for the financial
statements and internal control
from the auditor’s responsibility
for verifying the financial
statements and effectiveness
of internal control.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
Audit Responsibilities and Objectives
Chapter 6
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/ElderFra bibliotek6-1
Learning Objective 1
Explain the objective of conducting an audit of financial statements and an audit of internal controls.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6-2
Objective of Conducting an Audit of Financial Statements
The objective of the ordinary audit of financial statements is the expression of an opinion of the fairness with which they present fairly, in all respects, financial position, result of operations, and its cash flows in conformity with GAAP.
6-4
Steps to Develop Audit Objectives
4. Know general audit objectives for classes of transactions and accounts.
5. Know specific audit objectives for classes of transactions and accounts.
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
6-9
Auditor’s Responsibilities
➢ Material versus immaterial misstatements ➢ Reasonable assurance ➢ Errors versus fraud ➢ Professional skepticism ➢ Fraud resulting from fraudulent financial
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder
6-3
Steps to Develop Audit Objectives
1. Understand objectives and responsibilities for the audit.
6-7
Management’s Responsibilities
The Sarbanes-Oxley Act provides for criminal penalties for anyone who knowingly falsely certifies the statements.
©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder