INSTRUCTOR MANUAL FOR M M
Auditing & Assurance Services A Systematic Approach 12e Mes
M M M M M M M M
sier
Chapter 1 M
An Introduction to Assurance and Financial Statement Auditing
M M M M M M M
InternetMAssi
Multiple- gnments/MEa
ReviewM DiscussionM
LearningMObjectives MChoiceM Problems rthWear
Questions Cases
Questions Mini-
CasesM(EWMC
)
LOM1-
1:MUnderstandMwhyMstudyingMau
ditingMcanMbeMvaluableMtoMyouM
1 29 30
whetherMorMnotMyouMplanMtoMbe
comeManMauditor,MandMwhyMitMi
sMdifferentMfromMstudying
accounting.
LOM1-
2:MUnderstandMtheMdemandMforM
2,3,4 13,14,20 24,25 29
auditingMandMbeMableMtoMexplain
MtheMdesiredMcharacteristicsMof
auditorsMandMauditMservices.
LOM1-3:MKnowMtheMbasic
definitionMofMaMfinancialMstatement 5,6 13,14,15,16 25
Maudit.
LOM1-
4:MUnderstandMthreeMfundament
7 17,18 25
alMconceptsMthatMunderlieMfinanc
ialMstatement
auditing.
LOM1-5:MUnderstandMwhy
samplingMisMimportantMinManMaudit 8
.
LOM1-
6:MBeMableMtoMdescribeMtheMbas EWMC
9,M10 17,19,20 26
icMfinancialMstatementMauditingM
processMandMtheMphasesMinMwhi
chManMauditMisMcarriedMout.
LOM1-
7:MKnowMwhatManMauditMreportM 11 21,22,23 27,28
isMandMunderstandMthe
natureMofManMunqualifiedMreport.
LOM1-
8:MUnderstandMhowMtechnology
MandMauditMdataManalyticsMareMc
hangingMauditsMinMexcitingMway
s.
LOM1-
9:MUnderstandMwhyMauditing 12 30
demandsMlogic,Mreasoning,MandMres
ourcefulness.
15-1
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
,NOTE:MReferencesMtoMauditingMstandardsMinMtheMinstructorMmanualMfollowMaMsimilarMconventionMtoMthatMfollo
wedMinMtheMtext:MAICPAMstandardsMwillMbeMreferencedMbyMclarifiedMAUMsectionMandMPCAOBMstandardsMwillMb
eMreferencedMbyMAuditingMStandardM(AS)Mnumber.
15-2
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
,ENDMOFMCHAPTERMMATERIALSMCOMPARISONMCHART
Number Number
Comparison
inM11thMedition inM12thMedition
1-1 Unchanged 1-1
1-2 Unchanged 1-2
1-3 Unchanged 1-3
1-4 Unchanged 1-4
1-5 Unchanged 1-5
1-6 Revised 1-6
1-7 Unchanged 1-7
1-8 Unchanged 1-8
1-9 Unchanged 1-9
1-10 Unchanged 1-10
1-11 Unchanged 1-11
1-12 Unchanged 1-12
1-13 Unchanged 1-13
1-14 Unchanged 1-14
1-15 Unchanged 1-15
1-16 Unchanged 1-16
1-17 Unchanged 1-17
1-18 Unchanged 1-18
1-19 Unchanged 1-19
1-20 Unchanged 1-20
1-21 Unchanged 1-21
1-22 Unchanged 1-22
1-23 Unchanged 1-23
1-24 Unchanged 1-24
1-25 Revised 1-25
1-26 Revised 1-26
1-27 Unchanged 1-27
1-28 Unchanged 1-28
1-29 Unchanged 1-29
1-30 Unchanged 1-30
WhenMstudentsMenterMtheMfirstMintroductoryMclass,MtheyMseldomMunderstandMwhatMassuranceMorMa
uditingMentails.MGenerally,MtheyMwillMnotMhaveMreadMChapterM1MbeforeMclass,MsoMit‘sMimportantMto
MspendMtheMtimeMnecessaryMduringMtheMfirstMclassMtoMcaptureMstudents‘MattentionMandMstimulateMth
eirMinterestMinMauditing.
15-3
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
, Introduction
AfterMgoingMoverMtheMclassMexpectations,MweMspendMtheMfirstMpartMofMclassMdiscussingMandMill
ustratingMtheMdemandMforMauditingMandMtheMroleMofMauditingMinMsociety.MIfMstudentsMareMtoMbeMint
erestedMandMexcitedMtoMdigMinMandMlearnMthisMdauntingMnewMmaterial,MtheyMneedMtoMbeMconvinced
MthatMitMisMimportantMandMuseful.MThus,MweMalsoMemphasizeMthatMtheMconceptsMunderlyingMauditin
gMareMusefulMinMmanyMcontextsMotherMthanMauditing,MincludingMconsultingMandMmanagement.
LaterMinMtheMclass,MweMmightMaskMtheMstudentsMhowMtheyMwouldMauditMtheMautomobileMreven
uesM(sayM$100Mbillion)MofMaMlargeMautomobileMmanufacturer.MWeMtellMthemMthatMeachMcarMandMtru
ckMhasManMinvoiceMonMtheMwindowMandMinMtheMcompany'sMcomputerMsystem,MandMthatM8MmillionM
carsMandMtrucksMwereMsold.MWeMthenMaskMthemMhowMmanyMinvoicesMoutMofM8MmillionMtheyMwantM
toMexamineMinMorderMtoMverifyMtheM$100MbillionMofMrevenuesMinMtheMfinancialMstatements.MOfMcou
rse,MyouMwillMgetMsomeMoutlandishManswersM(e.g.,M400,000Minvoices).MWeMeventuallyMtellMthemMt
hatMyouMmayMnotMlookMatManyMinvoicesMandMthatMyouMmayMrelyMsolelyMonMtheMcompany‘sMinterna
lMcontrolsMinMconjunctionMwithMaMcarefulMratioManalysisMorMotherMtypeMofManalyticalMprocedure.MT
hisMtypeMofMexampleMquicklyMgetsMtheMstudents'MattentionMthatMauditingMinvolvesMaMsubstantialMa
mountMofMjudgmentMandMcommonMsense.
[LOM1-1]MTipsMforMLearningMAuditing
WeMspendMaMfewMminutesMonMthisMsectionMemphasizingMtheMdifferencesMbetweenMtheMstudyMo
fMaccountingM(whichMtheyMareMveryMfamiliarMwith)MandMtheMstudyMofMauditingM(whichMtheyMareMn
ot).M WeMtryMtoMmakeMsureMtheyMunderstandMwhatMauditingMfocusesMonMandMhowMitMisMmuchMmore
MconceptualMthanMtheirMotherMaccountingMcourses.MWeMintroduceMtheMideaMofMaM―toolMkit‖MandMh
owMitMrelatesMtoMwhatMweMwillMbeMcoveringMduringMtheMcourse.
[LOM1-2]MTheMDemandMforMAuditingMandMAssurance
WeMspendMaMreasonableMamountMofMtimeMduringMtheMfirstMlectureMdiscussingMwhyMthereMisMaM
demandMforMauditingMandMassuranceMservices.MManyMstudentsMthinkMthatMtheMdemandMforMauditin
gMisMdrivenMbyMtheMrequirementsMofMtheMSecuritiesMlaws.MItMisMimportantMthatMtheMstudentsMhaveMs
omeMbasicMunderstandingMofMtheMagencyMrelationshipMthatMleadsMtoMtheMdemandMforMauditing.MFig
ureM1-
1MprovidesMaMgoodMframeworkMforMthisMdiscussion.MWeMthenMbringMinMhowMtheMCPAMfitsMthisMne
edMwithMtheMqualitiesMofMindependence,Mintegrity,MandMobjectivity.MSometimesMweMdoMrole-
plays,MaskingMstudentsMtoMcomeMtoMtheMfrontMofMtheMroom.MOneMisMsellingMaMcar,MwhileMtheMotherM
isMinterestedMinMbuyingMit.MWeMletMthemMdiscussMtheirMconcerns,MwhatMinformationMtheyMwant,Mw
hatMtheMincentivesMofMtheMtwoMpartiesMare,MwhatMinformationMasymmetriesMmightMexist,Metc.MWeMt
henMtieMthisMscenario,MwhichMmostMstudentsMareMsomewhatMfamiliarMwithMorMatMleastMcanMrelateMt
o,MbackMtoMtheMideaMofMtheMdemandMforMauditing.
UseMFigureM1-1
15-4
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
Auditing & Assurance Services A Systematic Approach 12e Mes
M M M M M M M M
sier
Chapter 1 M
An Introduction to Assurance and Financial Statement Auditing
M M M M M M M
InternetMAssi
Multiple- gnments/MEa
ReviewM DiscussionM
LearningMObjectives MChoiceM Problems rthWear
Questions Cases
Questions Mini-
CasesM(EWMC
)
LOM1-
1:MUnderstandMwhyMstudyingMau
ditingMcanMbeMvaluableMtoMyouM
1 29 30
whetherMorMnotMyouMplanMtoMbe
comeManMauditor,MandMwhyMitMi
sMdifferentMfromMstudying
accounting.
LOM1-
2:MUnderstandMtheMdemandMforM
2,3,4 13,14,20 24,25 29
auditingMandMbeMableMtoMexplain
MtheMdesiredMcharacteristicsMof
auditorsMandMauditMservices.
LOM1-3:MKnowMtheMbasic
definitionMofMaMfinancialMstatement 5,6 13,14,15,16 25
Maudit.
LOM1-
4:MUnderstandMthreeMfundament
7 17,18 25
alMconceptsMthatMunderlieMfinanc
ialMstatement
auditing.
LOM1-5:MUnderstandMwhy
samplingMisMimportantMinManMaudit 8
.
LOM1-
6:MBeMableMtoMdescribeMtheMbas EWMC
9,M10 17,19,20 26
icMfinancialMstatementMauditingM
processMandMtheMphasesMinMwhi
chManMauditMisMcarriedMout.
LOM1-
7:MKnowMwhatManMauditMreportM 11 21,22,23 27,28
isMandMunderstandMthe
natureMofManMunqualifiedMreport.
LOM1-
8:MUnderstandMhowMtechnology
MandMauditMdataManalyticsMareMc
hangingMauditsMinMexcitingMway
s.
LOM1-
9:MUnderstandMwhyMauditing 12 30
demandsMlogic,Mreasoning,MandMres
ourcefulness.
15-1
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
,NOTE:MReferencesMtoMauditingMstandardsMinMtheMinstructorMmanualMfollowMaMsimilarMconventionMtoMthatMfollo
wedMinMtheMtext:MAICPAMstandardsMwillMbeMreferencedMbyMclarifiedMAUMsectionMandMPCAOBMstandardsMwillMb
eMreferencedMbyMAuditingMStandardM(AS)Mnumber.
15-2
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
,ENDMOFMCHAPTERMMATERIALSMCOMPARISONMCHART
Number Number
Comparison
inM11thMedition inM12thMedition
1-1 Unchanged 1-1
1-2 Unchanged 1-2
1-3 Unchanged 1-3
1-4 Unchanged 1-4
1-5 Unchanged 1-5
1-6 Revised 1-6
1-7 Unchanged 1-7
1-8 Unchanged 1-8
1-9 Unchanged 1-9
1-10 Unchanged 1-10
1-11 Unchanged 1-11
1-12 Unchanged 1-12
1-13 Unchanged 1-13
1-14 Unchanged 1-14
1-15 Unchanged 1-15
1-16 Unchanged 1-16
1-17 Unchanged 1-17
1-18 Unchanged 1-18
1-19 Unchanged 1-19
1-20 Unchanged 1-20
1-21 Unchanged 1-21
1-22 Unchanged 1-22
1-23 Unchanged 1-23
1-24 Unchanged 1-24
1-25 Revised 1-25
1-26 Revised 1-26
1-27 Unchanged 1-27
1-28 Unchanged 1-28
1-29 Unchanged 1-29
1-30 Unchanged 1-30
WhenMstudentsMenterMtheMfirstMintroductoryMclass,MtheyMseldomMunderstandMwhatMassuranceMorMa
uditingMentails.MGenerally,MtheyMwillMnotMhaveMreadMChapterM1MbeforeMclass,MsoMit‘sMimportantMto
MspendMtheMtimeMnecessaryMduringMtheMfirstMclassMtoMcaptureMstudents‘MattentionMandMstimulateMth
eirMinterestMinMauditing.
15-3
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
, Introduction
AfterMgoingMoverMtheMclassMexpectations,MweMspendMtheMfirstMpartMofMclassMdiscussingMandMill
ustratingMtheMdemandMforMauditingMandMtheMroleMofMauditingMinMsociety.MIfMstudentsMareMtoMbeMint
erestedMandMexcitedMtoMdigMinMandMlearnMthisMdauntingMnewMmaterial,MtheyMneedMtoMbeMconvinced
MthatMitMisMimportantMandMuseful.MThus,MweMalsoMemphasizeMthatMtheMconceptsMunderlyingMauditin
gMareMusefulMinMmanyMcontextsMotherMthanMauditing,MincludingMconsultingMandMmanagement.
LaterMinMtheMclass,MweMmightMaskMtheMstudentsMhowMtheyMwouldMauditMtheMautomobileMreven
uesM(sayM$100Mbillion)MofMaMlargeMautomobileMmanufacturer.MWeMtellMthemMthatMeachMcarMandMtru
ckMhasManMinvoiceMonMtheMwindowMandMinMtheMcompany'sMcomputerMsystem,MandMthatM8MmillionM
carsMandMtrucksMwereMsold.MWeMthenMaskMthemMhowMmanyMinvoicesMoutMofM8MmillionMtheyMwantM
toMexamineMinMorderMtoMverifyMtheM$100MbillionMofMrevenuesMinMtheMfinancialMstatements.MOfMcou
rse,MyouMwillMgetMsomeMoutlandishManswersM(e.g.,M400,000Minvoices).MWeMeventuallyMtellMthemMt
hatMyouMmayMnotMlookMatManyMinvoicesMandMthatMyouMmayMrelyMsolelyMonMtheMcompany‘sMinterna
lMcontrolsMinMconjunctionMwithMaMcarefulMratioManalysisMorMotherMtypeMofManalyticalMprocedure.MT
hisMtypeMofMexampleMquicklyMgetsMtheMstudents'MattentionMthatMauditingMinvolvesMaMsubstantialMa
mountMofMjudgmentMandMcommonMsense.
[LOM1-1]MTipsMforMLearningMAuditing
WeMspendMaMfewMminutesMonMthisMsectionMemphasizingMtheMdifferencesMbetweenMtheMstudyMo
fMaccountingM(whichMtheyMareMveryMfamiliarMwith)MandMtheMstudyMofMauditingM(whichMtheyMareMn
ot).M WeMtryMtoMmakeMsureMtheyMunderstandMwhatMauditingMfocusesMonMandMhowMitMisMmuchMmore
MconceptualMthanMtheirMotherMaccountingMcourses.MWeMintroduceMtheMideaMofMaM―toolMkit‖MandMh
owMitMrelatesMtoMwhatMweMwillMbeMcoveringMduringMtheMcourse.
[LOM1-2]MTheMDemandMforMAuditingMandMAssurance
WeMspendMaMreasonableMamountMofMtimeMduringMtheMfirstMlectureMdiscussingMwhyMthereMisMaM
demandMforMauditingMandMassuranceMservices.MManyMstudentsMthinkMthatMtheMdemandMforMauditin
gMisMdrivenMbyMtheMrequirementsMofMtheMSecuritiesMlaws.MItMisMimportantMthatMtheMstudentsMhaveMs
omeMbasicMunderstandingMofMtheMagencyMrelationshipMthatMleadsMtoMtheMdemandMforMauditing.MFig
ureM1-
1MprovidesMaMgoodMframeworkMforMthisMdiscussion.MWeMthenMbringMinMhowMtheMCPAMfitsMthisMne
edMwithMtheMqualitiesMofMindependence,Mintegrity,MandMobjectivity.MSometimesMweMdoMrole-
plays,MaskingMstudentsMtoMcomeMtoMtheMfrontMofMtheMroom.MOneMisMsellingMaMcar,MwhileMtheMotherM
isMinterestedMinMbuyingMit.MWeMletMthemMdiscussMtheirMconcerns,MwhatMinformationMtheyMwant,Mw
hatMtheMincentivesMofMtheMtwoMpartiesMare,MwhatMinformationMasymmetriesMmightMexist,Metc.MWeMt
henMtieMthisMscenario,MwhichMmostMstudentsMareMsomewhatMfamiliarMwithMorMatMleastMcanMrelateMt
o,MbackMtoMtheMideaMofMtheMdemandMforMauditing.
UseMFigureM1-1
15-4
CopyrightM©M2022MMcGrawMHillMEducation.MAllMrightsMreserved.MNoMreproductionMorMdistributionMwithoutMtheMpriorMwrittenMconsentMofM
McGrawMHillM Education.
