14TH Solution Manual of Auditing And Assurance

Visit Financial institution For 14TH Answer Key of Auditing And Assurance

1. ISBN-10

   0132576074
2. ISBN-13

   978-0132576079
   ‘
3. Chapter 1

    

   1-1 (Objective 1-5) Elucidate the connections between audit services, attestation services, and assurance services, providing illustrations for each.

   1-2 (Objective 1-3) Discuss the primary factors in today’s society that have heightened the demand for independent audits significantly compared to 50 years ago.

   1-3 (Objective 1-3) Discriminate between the risks: risk-free interest rate, business risk, and information risk. Which risk or risks does an auditor mitigate through conducting an audit?

   1-4 (Objective 1-4) Identify the main causes of information risk and outline the three fundamental approaches to mitigate information risk. Evaluate the pros and cons of each approach.

   1-5 (Objective 1-1) Define the concept of assessing the level of agreement between information and established criteria. What are the criteria for auditing the tax return of Jones Company by an internal revenue agent? And for auditing Jones Company’s financial statements by a CPA firm?

   1-6 (Objectives 1-1, 1-7) Describe the nature of the evidence used by the internal revenue agent in auditing Jones Company’s tax return.

   1-7 (Objective 1-2) It would be a serious lapse of duty for an auditor not to have a thorough understanding of accounting in the…

   1-8 (Objective 1-6) What are the differences and similarities in audits of financial statements, compliance audits, and operational audits?

   1-9 (Objectives 1-6, 1-7) Enumerate five instances of specific operational audits that an internal auditor in a manufacturing company could conduct.

   1-10 (Objectives 1-5, 1-6) What information does the auditor require about the client’s business in an audit of historical financial statements? Explain how this information may be valuable in providing other assurance or advisory services to the client.

   1-11 (Objective 1-7) What are the major disparities in the scope of audit responsibilities for CPAs, GAO auditors, IRS agents, and internal auditors?

   1-12 (Objective 1-8) Identify the four components of the Uniform CPA Examination.

   1-13 (Objective 1-5) Justify why CPAs need to be knowledgeable about information
   technology, including e-commerce technologies.

    

   3. A report indicating whether the company has abided by restrictive covenants related to officer compensation and dividend payments stipulated in a bank loan…

    

   agreement.

   4. An electronic seal indicating that an electronic vendor adheres to specific practices.
   5. A report indicating whether a government entity has complied with certain

   government regulations.

   6. A report on the examination of a financial forecast.
   7. A review report that offers limited assurance on whether financial statements

   are fairly presented in accordance with U.S. GAAP.

   8. A report on management’s declaration regarding the company’s carbon emissions level.
   9. A report concerning management’s attestation on the efficiency of controls over the

   availability, validity, integrity, and durability of its accounting information

   system.

   10. An evaluation of the efficacy of main metrics used to assess an entity’s success

   in achieving specific objectives tied to an entity’s strategic plan and vision.

   (1) An audit of historical financial statements.

   (2) An attestation service other than an audit service.

   (3) An assurance service that is not an attestation service.

   1-17 (Objective 1-3) Busch Company has an existing loan of $4.5 million with a yearly interest rate of 5.5%. The company furnishes an internally prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Busch Company’s current loan agreement with a new one. United National Bank has offered to lend Busch $4.5 million at a rate of 4.5% but insists on Busch providing financial statements reviewed by a CPA firm. First City Bank has

   Chapter 1 / THE DEMAND FOR AUDIT AND OTHER ASSURANCE SERVICES

   21

   22

   Required

   offered to loan Busch $4.5 million at a rate of 3.5% but requires Busch to provide financial statements that have been audited by a CPA firm. Busch Company’s controller engaged a CPA firm and was quoted an estimated fee of $20,000 to conduct a review and $45,000 to perform an audit.

   1-18 (Objectives 1-3, 1-4, 1-5) Consumers Union is a non-profit organization that furnishes information and counsel on consumer goods and services. A significant aspect of its function is the testing of various brands of consumer products available on the market and then reporting the test results in Consumer Reports, a monthly publication. The products it tests include medium-sized cars, residential dehumidifiers, flat-screen TVs, and boys’ jeans.

   1-19 (Objective 1-1) James Burrow is the loan officer for the National Bank of Dallas. National has a loan of $325,000 outstanding to Regional Delivery Service, a company specialized in delivering various products on behalf of smaller businesses. National’s collateral on the loan consists of 25 small delivery trucks with an average original cost of $24,000.
   Burrow is concerned about the collectability of the outstanding loan and the existence of the trucks. Hence, he engages Samantha Altman, CPA, to count the trucks, utilizing registration information retained by Burrow. She was engaged because she focuses mainly on auditing used vehicle and truck dealerships and possesses extensive specialized knowledge about used vehicles. Burrow requests Altman to issue a report stating:

   states the approximate wholesale prices of all used truck models, and also employing the poor, good, and excellent condition guidelines.

   Required

   Part 1 / THE AUDITING PROFESSION

    

   a. For each of the following components of the definition of auditing, state which part of the preceding narrative embodies the definition:

   (1) Information

   (2) Established criteria

   (3) Collecting and evaluating evidence (4) Competent, independent person

   (5) Reporting results

   1-20 (Objective 1-7) Five college seniors majoring in accounting are deliberating alternative career plans. The first senior intends to become an internal revenue agent due to a keen interest in income taxes. He believes that a background in tax auditing will afford him better exposure to income taxes than any other available career option. The second senior has opted to join a CPA firm for at least 5 years, potentially as a permanent career. She perceives that the breadth of experience in auditing and related fields offers a superior choice than any other available option. The third senior has chosen a career in internal auditing with a sizable industrial corporation due to the diverse organizational aspects involved with which internal auditors engage. The fourth senior plans to become an auditor for the GAO because she believes this career will furnish excellent experience in computer risk assessment techniques. The fifth senior plans to pursue a career in auditing but has not decided on the type of organization to enter. He is particularly interested in opportunities for professional growth while also considering meaningful and engaging employment.

   Required

   1-21 (Objectives 1-6, 1-7) In the routine execution of their responsibilities, auditors frequently conduct audits or reviews of the following: F Enhancer

   their time efficiently in conducting audits.

   audit staff.

   statements fairly present the actual disbursements made during a period of time.

   been adhered to.

   Required

   Chapter 1 / THE DEMAND FOR AUDIT AND OTHER ASSURANCE SERVICES

   Required

   1-22 (Objectives 1-3, 1-5) Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. During lunch, he is taken aback when his friend James Foley asks him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors every year? Dave responded, “Well, auditing is just one of several services we provide. Most of our client work does not involve financial statement audits, and our audit clients seem to enjoy interacting with us.”

   INTERNET PROBLEM 1-1: CPA REQUIREMENTS

   Required

   Part 1 / THE AUDITING PROFESSION