Chapter5t015t-
5tAuditing5tand5tAssurance5tServices
Solution Manual For Auditing & Assurance Services
5t 5t 5t 5t 5t 5t 5t5t
9th Edition by Timothy Louwers, Penelope Bagley
5t 5t 5t 5t 5t 5t
,Chapter5t015t-
5tAuditing5tand5tAssurance5tServices
CHAPTER5t01
Auditing5tand5tAssurance5tServices
LEARNING5tOBJECTIVES
Review5tChec Multiple5tChoi Exercises,5tProblems,5t
kpoints ce and5tSimulations
1.5tDefine5tinformation5trisk5tand5texplain5thow5t 1,5t2,5t3 29,5t31,5t38 65*
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SOLUTIONS5tFOR5tREVIEW5tCHECKPOINTS
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ttimely,5trelevant,5tand5treliable5tinformation.5tThere5tare5tat5tleast5tfour5tenvironmental5tconditions5tthat5tin
crease5tdemand5tfor5treliable5tinformation.5tFirst,5tcomplexity5twhich5timplies5tthat5tevents5tand5ttransactio
ns5tin5ttoday‗s5tglobal5tbusiness5tenvironment5tcan5tbe5tcomplicated.5tMost5tinvestors5tdo5tnot5thave5tthe5tl
evel5tof5texpertise5tneeded5tto5tproperly5taccount5tfor5tcomplex5ttransactions.5tSecond5tis5tremoteness5twhi
ch5timplies5tthat5tdecision5tmakers5tare5toften5tseparated5tfrom5tcurrent5tand5tpotential5tbusiness5trelationshi
ps5tdue5tto5tdistance5tand5ttime.5tFor5texample,5tinvestors5tmay5tnot5tbe5table5tto5tvisit5tdistant5tlocations5tto5
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mation5trisk5tor5tthe5tprobability5tthat5tthe5tinformation5tcirculated5tby5tan5tentity5twill5tbe5tfalse5tor5tmisle
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elevance5tof5tinformation,5tand5tthese5ttwo5tfeatures5tare5tclosely5trelated5tto5tthe5tfamiliar5tcredibility-
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, Chapter5t015t-
5tAuditing5tand5tAssurance5tServices
helps5tresolve5tthose5tdoubts5tbecause5tthe
5tAuditing5tand5tAssurance5tServices
Solution Manual For Auditing & Assurance Services
5t 5t 5t 5t 5t 5t 5t5t
9th Edition by Timothy Louwers, Penelope Bagley
5t 5t 5t 5t 5t 5t
,Chapter5t015t-
5tAuditing5tand5tAssurance5tServices
CHAPTER5t01
Auditing5tand5tAssurance5tServices
LEARNING5tOBJECTIVES
Review5tChec Multiple5tChoi Exercises,5tProblems,5t
kpoints ce and5tSimulations
1.5tDefine5tinformation5trisk5tand5texplain5thow5t 1,5t2,5t3 29,5t31,5t38 65*
the5tfinancial5tstatement5tauditing5tprocess5t
helps5tto5treduce5tthis5trisk,5tthereby5treducin
g5tthe5tcost5tof5tcapital5tfor5ta5tcompany.
2. 4,5t5,5t6,5t7,5t8 23,5t25,5t28,5t44, 60,5t65*
Define5tand5tcontrast5tassurance,5tattestation 50
,
and5tfinancial5tstatement5tauditing5tservices.
3. 9,5t10,5t11 36,5t39,5t40,5t41,5t4 62,5t63,5t67,5t68,5t69
Describe5tand5tdefine5tthe5tassertions5tthat 5,
5tmanagement5tmakes5tabout5tthe5trecognitio 46,5t47,5t48,5t49,5t5
n,5tmeasurement,5tpresentation,5tand5tdisclosu 2,
re5tof5tthe5tfinancial5tstatements5tand5texplain 53,5t54,5t55,5t57,5t5
5twhy5tauditors5tuse5tthem5tas5ta5tfocal5tpoint5t 8,
of5tthe5taudit. 59
4. 12 24,5t37 61
Define5tprofessional5tskepticism5tand5texpl
ain5tits5tkey5tcharacteristics.
5. 13,5t14 30,5t42,5t56 72
Describe5tthe5torganization5tof5tpublic5tacco
unting5tfirms5tand5tidentify5tthe5tvarious5tservi
ces5tthat5tthey5toffer.
6. 15,5t16,5t17,5t18 26,5t27,5t32,5t34,5t3 64,5t66
Describe5tthe5taudits5tand5tauditors5 5
tin5tgovernmental,5tinternal,5tand5topera
tional5tauditing.
7. 19,5t20,5t21,5t22 33,5t43,5t51 70,5t71
List5tand5texplain5tthe5trequirements5tfor5t
becoming5ta5tcertified5tpublic5taccountant5t(CP
A)5tand5tother5tcertifications5tavailable5tto5tan
5taccounting5tprofessional.
(*)5tItem5trelates5tto5tmultiple5tlearning5tobjectives
,Chapter5t015t-
5tAuditing5tand5tAssurance5tServices
SOLUTIONS5tFOR5tREVIEW5tCHECKPOINTS
1.1 Business5trisk5tis5tthe5trisk5tthat5tan5tentity5twill5tfail5tto5tmeet5tits5tbusiness5tobjectives.5tWhen5tass
essing5tbusiness5trisk,5ta5tprofessional5tmust5tconsider5tall5tpossible5tthreats5tto5tan5tentity‗s5tgoals5tand5t
objectives.5tSome5tillustrative5texamples5tinclude5tthe5trisk5tthat:5t1)5tits5texisting5tcustomers5twill5tstart5t
buying5tproducts5tor5tservices5tfrom5tits5tprimary5tcompetitors;5t2)5tits5tproduct5tlines5twill5tbecome5tobs
olete;5t3)5tits5ttaxes5twill5tincrease;5t4)5tkey5tgovernment5tcontracts5twill5tbe5tlost;5t5)5tkey5temployees5twi
ll5tleave5tthe5tentity;5tand5tmany5tother5texamples5texist.
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mpetitive5tbusiness5tenvironment,5tdecision5tmakers5tsuch5tas5tchief5texecutive5tofficers5t(CEOs)5tdemand5
ttimely,5trelevant,5tand5treliable5tinformation.5tThere5tare5tat5tleast5tfour5tenvironmental5tconditions5tthat5tin
crease5tdemand5tfor5treliable5tinformation.5tFirst,5tcomplexity5twhich5timplies5tthat5tevents5tand5ttransactio
ns5tin5ttoday‗s5tglobal5tbusiness5tenvironment5tcan5tbe5tcomplicated.5tMost5tinvestors5tdo5tnot5thave5tthe5tl
evel5tof5texpertise5tneeded5tto5tproperly5taccount5tfor5tcomplex5ttransactions.5tSecond5tis5tremoteness5twhi
ch5timplies5tthat5tdecision5tmakers5tare5toften5tseparated5tfrom5tcurrent5tand5tpotential5tbusiness5trelationshi
ps5tdue5tto5tdistance5tand5ttime.5tFor5texample,5tinvestors5tmay5tnot5tbe5table5tto5tvisit5tdistant5tlocations5tto5
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ncial5tstatements5tneed5tto5tmake5tdecisions5tmore5trapidly5tthan5tever5tbefore.5tAs5ta5tresult,5tthe5tability5tt
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well5tinvolve5tsignificant5tinvestments.5 t As5ta5tresult,5tthe5tconsequences5tcan5tbe5tsevere5tif5tinformation5
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mation5trisk5tor5tthe5tprobability5tthat5tthe5tinformation5tcirculated5tby5tan5tentity5twill5tbe5tfalse5tor5tmisle
ading.5tBecause5tthe5tprimary5tsource5tof5tinformation5tfor5tinvestors5tand5tcreditors5tis5tthe5tcompany5titse
lf,5tan5tincentive5texists5tfor5tthat5tcompany‗s5tmanagement5tto5tmake5ttheir5tbusiness5tor5tservice5tappear5tt
o5tbe5tbetter5tthan5tit5tactually5tmay5tbe,5tto5tput5ttheir5tbest5tfoot5tforward.5tAs5ta5tresult,5tpreparers5tand5tiss
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5tfor5tthe5tdemand5tfor5treliable5tinformation.
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erving5tintegrity5tand5tobjectivity5twhen5tperforming5tassurance5tservices.
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ditional5tarea5tof5texpertise.5tCPAs5tcan5tenhance5tquality5tby5tassuring5tusers5tabout5tthe5treliability5tand5tr
elevance5tof5tinformation,5tand5tthese5ttwo5tfeatures5tare5tclosely5trelated5tto5tthe5tfamiliar5tcredibility-
lending5tproducts5tof5tattestation5tand5taudit5tservices.5t―Context‖5tis5trelevance5tin5ta5tdifferent5tlight.5tFor5ta
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5tits5tcontext,5tfor5tdecision5tmakers.5tBecause5tinformation5t(e.g.,5tfinancial5tstatements)5tare5tprepared5tby
5tmanagers5tof5tan5tentity5twho5thave5tauthority5tand5tresponsibility5tfor5tfinancial5tsuccess5tor5tfailure,5tan5to
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helps5tresolve5tthose5tdoubts5tbecause5tthe
