SOLUTION vvMANUAL vvFOR
vvPrinciples vvOf vvAuditing vvAnd vvOther vvAssurance vvServices vv
23rd vvEdition vvBy vvRay vvWhittington vvKurt vv
ALL vvChapters vv(1 vv- vv21)
, Table vvof vvContents
Chapter vv1: vvThe vvRole vvof vvthe vvPublic vvAccountant vvin vvthe vvAmericanEconomy
Chapter vv2: vvProfessional vvStandards
Chapter vv3: vvProfessional vvEthics
Chapter vv4: vvLegal vvLiability vvof vvCPAs
Chapter vv5: vvAudit vvEvidence vvand vvDocumentation
Chapter vv6: vvAudit vvPlanning, vvUnderstanding vvthe vvClient, vvAssessingRisks, vvand vvResponding
Chapter vv7: vvInternal vvControl
Chapter vv8: vvConsideration vvof vvInternal vvControl vvin vvan vvInformationTechnology vvEnvironment
Chapter vv9: vvAudit vvSampling
Chapter vv10: vvCash vvand vvFinancial vvInvestments
Chapter vv11: vvAccounts vvReceivable, vvNotes vvReceivable, vvandRevenue
Chapter vv12: vvInventories vvand vvCost vvof vvGoods vvSold
Chapter vv13: vvProperty, vvPlant, vvand vvEquipment: vvDepreciation vvandDepletion
Chapter vv14: vvAccounts vvPayable vvand vvOther vvLiabilities
Chapter vv15: vvDebt vvand vvEquity vvCapital
Chapter vv16: vvAuditing vvOperations vvand vvCompleting vvthe vvAudit
Chapter vv17: vvAuditors’ vvReports
Chapter vv18: vvIntegrated vvAudits vvof vvPublic vvCompanies
Chapter vv19: vvAdditional vvAssurance vvServices: vvHistorical vvFinancialInformation
Chapter vv20: vvAdditional vvAssurance vvServices: vvOther vvInformation
Chapter vv21: vvInternal, vvOperational, vvand vvCompliance vvAuditing
,CHAPTER vv1
The vvRole vvof vvthe vvPublic
vvAccountant vvin vvthe
American v v Economy
Review vvQuestions
1-1 The vv―crisis vvof vvcredibility‖ vvlargely vvarose vvfrom vvthe vvnumber vvof
vvcompanies vvthat vvrestated vvtheir vvpreviously vvissued vvfinancial vvstatements
vvas vva vvresult vvof vvaccounting vvirregularities vvand vvfraud. vvEspecially
vvresponsible vvwerevvthe vvvery vvvisible vvEnron vvand vvWorldCom vvfraud vvcases.
vvBoth vvcompanies vvfiled vvfor vvbankruptcy vvand vvconstituted vvthe vvlargest
vvcompanies vvin vvAmerican vvhistory vvto vvdo vvso. vvThe vvextent vvof vvthe
vvaccounting vvirregularities vvand vvfraud vvbeing vvinvestigated vvand vvdisclosed
vvbrought vvinto vvquestion vvthe vveffectiveness vvof vvfinancial vvstatement vvaudits.
vvIn vvaddition, vvthe vvcriminal vvconviction vvof vvArthur vvAndersen, vvLLP, vvone
vvof vvthe vvthen vvBig vv5 vvaccounting vvfirms, vvon vvcharges vvof vvdestroying
vvdocuments vvrelated vvto vvthe vvEnron vvcase vvbrought vvinto vvquestion vvthe
vvethics vvstandards vvof vvthe vvprofession.
1-2 Assurance vvservices vvare vvprofessional vvservices vvthat vvenhance vvthe vvquality
vvof vvinformation, vvor vvits vvcontext, vvfor vvdecision-making. vvThe vvtwo vvtypes
vvare: vv(a) vvthose vvthat vvincrease vvthe vvreliability vvof vvinformation vvand vv(b)
vvthose vvthat vvinvolve vvputting vvinformation vvin vva vvform vvor vvcontext vvthat
vvfacilitates vvdecision-making.
1-3 A vvfinancial vvstatement vvaudit vvis, vvby vvfar, vvthe vvmost vvcommon vvtype vvof
vvattest vvengagement. vvThe vvoverall vvassertion,vvmade vvby vvmanagement, vvmost
vvfrequently vvis vvthat vvthe vvfinancial vvstatements vvfollow vvgenerally vvaccepted
vvaccounting vvprinciples.
1-4 A vvlarge vvcorporation vvwith vvsecurities vvlisted vvon vva vvstock vvexchange vvis
vvrequired vvby vvthe vvrules vvof vvthe vvstock vvexchange vvand vvby vvthe vvrules vvof
vvthe vvSecurities vvand vvExchange vvCommission vvto vvprovide vvan vvaudit vvreport
vvwith vvthevvannual vvfinancial vvstatements vvfurnished vvto vvits vvstockholders. vvIt
vvalso vvis vvrequired vvto vvengage vvthe vvauditors vvto vvprovide vvan vvopinion vvon
vvits vvinternal vvcontrol. vvApart vvfrom vvlegal vvrequirements, vvhowever, vva
vvlarge vvlisted vvcorporation vvrecognizes vvthat vvit vvmust vvmaintain vvinvestor
vvconfidence vvin vvthe vvreliability vvof vvits vvfinancial vvstatements vvand vvinternal
vvcontrol vvover vvfinancial vvreporting vvif vvit vvis vvto vvcontinue vvto vvbe vvable
, vvto vvsecure vvcapital vvfrom vvthe vvpublic. vvThe vvreport vvby vva vvfirm vvof
vvcertified vvpublic vvaccountants vvadds vvcredibility vvto vvthe vvfinancial vvstatements
vvprepared vvby vvthe vvcorporation. v v When vva vvsmall vvfamily-owned vventerprise
vvelects vvto vvhave vvan vvaudit, vvthe vvpurpose vvusually vvis vvto vvuse vvthe
vvauditors' vvreport vvto vvsupport vvan vvapplication vvfor vva vvbank vvloan.
vvPrinciples vvOf vvAuditing vvAnd vvOther vvAssurance vvServices vv
23rd vvEdition vvBy vvRay vvWhittington vvKurt vv
ALL vvChapters vv(1 vv- vv21)
, Table vvof vvContents
Chapter vv1: vvThe vvRole vvof vvthe vvPublic vvAccountant vvin vvthe vvAmericanEconomy
Chapter vv2: vvProfessional vvStandards
Chapter vv3: vvProfessional vvEthics
Chapter vv4: vvLegal vvLiability vvof vvCPAs
Chapter vv5: vvAudit vvEvidence vvand vvDocumentation
Chapter vv6: vvAudit vvPlanning, vvUnderstanding vvthe vvClient, vvAssessingRisks, vvand vvResponding
Chapter vv7: vvInternal vvControl
Chapter vv8: vvConsideration vvof vvInternal vvControl vvin vvan vvInformationTechnology vvEnvironment
Chapter vv9: vvAudit vvSampling
Chapter vv10: vvCash vvand vvFinancial vvInvestments
Chapter vv11: vvAccounts vvReceivable, vvNotes vvReceivable, vvandRevenue
Chapter vv12: vvInventories vvand vvCost vvof vvGoods vvSold
Chapter vv13: vvProperty, vvPlant, vvand vvEquipment: vvDepreciation vvandDepletion
Chapter vv14: vvAccounts vvPayable vvand vvOther vvLiabilities
Chapter vv15: vvDebt vvand vvEquity vvCapital
Chapter vv16: vvAuditing vvOperations vvand vvCompleting vvthe vvAudit
Chapter vv17: vvAuditors’ vvReports
Chapter vv18: vvIntegrated vvAudits vvof vvPublic vvCompanies
Chapter vv19: vvAdditional vvAssurance vvServices: vvHistorical vvFinancialInformation
Chapter vv20: vvAdditional vvAssurance vvServices: vvOther vvInformation
Chapter vv21: vvInternal, vvOperational, vvand vvCompliance vvAuditing
,CHAPTER vv1
The vvRole vvof vvthe vvPublic
vvAccountant vvin vvthe
American v v Economy
Review vvQuestions
1-1 The vv―crisis vvof vvcredibility‖ vvlargely vvarose vvfrom vvthe vvnumber vvof
vvcompanies vvthat vvrestated vvtheir vvpreviously vvissued vvfinancial vvstatements
vvas vva vvresult vvof vvaccounting vvirregularities vvand vvfraud. vvEspecially
vvresponsible vvwerevvthe vvvery vvvisible vvEnron vvand vvWorldCom vvfraud vvcases.
vvBoth vvcompanies vvfiled vvfor vvbankruptcy vvand vvconstituted vvthe vvlargest
vvcompanies vvin vvAmerican vvhistory vvto vvdo vvso. vvThe vvextent vvof vvthe
vvaccounting vvirregularities vvand vvfraud vvbeing vvinvestigated vvand vvdisclosed
vvbrought vvinto vvquestion vvthe vveffectiveness vvof vvfinancial vvstatement vvaudits.
vvIn vvaddition, vvthe vvcriminal vvconviction vvof vvArthur vvAndersen, vvLLP, vvone
vvof vvthe vvthen vvBig vv5 vvaccounting vvfirms, vvon vvcharges vvof vvdestroying
vvdocuments vvrelated vvto vvthe vvEnron vvcase vvbrought vvinto vvquestion vvthe
vvethics vvstandards vvof vvthe vvprofession.
1-2 Assurance vvservices vvare vvprofessional vvservices vvthat vvenhance vvthe vvquality
vvof vvinformation, vvor vvits vvcontext, vvfor vvdecision-making. vvThe vvtwo vvtypes
vvare: vv(a) vvthose vvthat vvincrease vvthe vvreliability vvof vvinformation vvand vv(b)
vvthose vvthat vvinvolve vvputting vvinformation vvin vva vvform vvor vvcontext vvthat
vvfacilitates vvdecision-making.
1-3 A vvfinancial vvstatement vvaudit vvis, vvby vvfar, vvthe vvmost vvcommon vvtype vvof
vvattest vvengagement. vvThe vvoverall vvassertion,vvmade vvby vvmanagement, vvmost
vvfrequently vvis vvthat vvthe vvfinancial vvstatements vvfollow vvgenerally vvaccepted
vvaccounting vvprinciples.
1-4 A vvlarge vvcorporation vvwith vvsecurities vvlisted vvon vva vvstock vvexchange vvis
vvrequired vvby vvthe vvrules vvof vvthe vvstock vvexchange vvand vvby vvthe vvrules vvof
vvthe vvSecurities vvand vvExchange vvCommission vvto vvprovide vvan vvaudit vvreport
vvwith vvthevvannual vvfinancial vvstatements vvfurnished vvto vvits vvstockholders. vvIt
vvalso vvis vvrequired vvto vvengage vvthe vvauditors vvto vvprovide vvan vvopinion vvon
vvits vvinternal vvcontrol. vvApart vvfrom vvlegal vvrequirements, vvhowever, vva
vvlarge vvlisted vvcorporation vvrecognizes vvthat vvit vvmust vvmaintain vvinvestor
vvconfidence vvin vvthe vvreliability vvof vvits vvfinancial vvstatements vvand vvinternal
vvcontrol vvover vvfinancial vvreporting vvif vvit vvis vvto vvcontinue vvto vvbe vvable
, vvto vvsecure vvcapital vvfrom vvthe vvpublic. vvThe vvreport vvby vva vvfirm vvof
vvcertified vvpublic vvaccountants vvadds vvcredibility vvto vvthe vvfinancial vvstatements
vvprepared vvby vvthe vvcorporation. v v When vva vvsmall vvfamily-owned vventerprise
vvelects vvto vvhave vvan vvaudit, vvthe vvpurpose vvusually vvis vvto vvuse vvthe
vvauditors' vvreport vvto vvsupport vvan vvapplication vvfor vva vvbank vvloan.
