SOLUTION MANUAL FOR
ii ii
ii Principles Of Auditing And Other Assurance Services
ii ii ii ii ii ii
ii
23rd Edition By Ray Whittington Kurt
ii ii ii ii ii ii
ALL Chapters (1 - 21)
ii ii ii ii
, • Table of Contents
ii ii
Chapter ii1: iiThe iiRole iiof iithe iiPublic iiAccountant iiin iithe iiAmericanEconomy
Chapter ii2: iiProfessional iiStandards
Chapter ii3: iiProfessional iiEthics
Chapter ii4: iiLegal iiLiability iiof iiCPAs
Chapter ii5: iiAudit iiEvidence iiand iiDocumentation
Chapter ii6: iiAudit iiPlanning, iiUnderstanding iithe iiClient, iiAssessingRisks, iiand iiResponding
Chapter ii7: iiInternal iiControl
Chapter ii8: iiConsideration iiof iiInternal iiControl iiin iian iiInformationTechnology iiEnvironment
Chapter ii9: iiAudit iiSampling
Chapter ii10: iiCash iiand iiFinancial iiInvestments
Chapter ii11: iiAccounts iiReceivable, iiNotes iiReceivable, iiandRevenue
Chapter ii12: iiInventories iiand iiCost iiof iiGoods iiSold
Chapter ii13: iiProperty, iiPlant, iiand iiEquipment: iiDepreciation iiandDepletion
Chapter ii14: iiAccounts iiPayable iiand iiOther iiLiabilities
Chapter ii15: iiDebt iiand iiEquity iiCapital
Chapter ii16: iiAuditing iiOperations iiand iiCompleting iithe iiAudit
Chapter ii17: iiAuditors’ iiReports
Chapter ii18: iiIntegrated iiAudits iiof iiPublic iiCompanies
Chapter ii19: iiAdditional iiAssurance iiServices: iiHistorical iiFinancialInformation
Chapter ii20: iiAdditional iiAssurance iiServices: iiOther iiInformation
Chapter ii21: iiInternal, iiOperational, iiand iiCompliance iiAuditing
,CHAPTER 1 ii
The Role of the ii ii ii
ii Public Accountant in
ii ii
ii the
American Economy ii
Review iiQuestions
1-1 The ii―crisis iiof iicredibility‖ iilargely iiarose iifrom iithe iinumber iiof iicompanies iithat iirestated iitheir
iipreviously iiissued iifinancial ii statements i i as i i a ii result ii of i i accounting ii irregularities i i and iifraud.
i i Especially iiresponsible iiwereithe iivery iivisible iiEnron iiand ii WorldCom iifraud ii cases. ii Both ii companies
i i filed ii for ii bankruptcy iiand ii constituted iithe iilargest i i companies ii in iiAmerican ii history iito iido iiso. i i The
iiextent i i of ii the iiaccounting iiirregularities ii and iifraud iibeing ii investigated iiand ii disclosed iibrought ii into
iiquestion iithe iieffectiveness ii of ii financial iistatement ii audits. i i In iiaddition, iithe iicriminal iiconviction iiof
iiArthur iiAndersen, iiLLP, iione iiof ii the iithen iiBig ii5 ii accounting iifirms, iion iicharges ii of ii destroying
iidocuments ii related iito ii the iiEnron iicase iibrought i i into iiquestion iithe iiethics ii standards ii of ii the
iiprofession.
1-2 Assurance iiservices iiare iiprofessional iiservices iithat iienhance iithe iiquality iiof iiinformation, iior iiits
iicontext, iifor iidecision-making. iiThe iitwo iitypes iiare: ii(a) iithose iithat iiincrease iithe iireliability iiof
iiinformation iiand ii(b) iithose iithat iiinvolve iiputting iiinformation iiin iia iiform iior iicontext iithat iifacilitates
iidecision-making.
1-3 A iifinancial iistatement iiaudit ii is, iiby iifar, iithe iimost ii common iitype iiof iiattest iiengagement. i i The
iioverall iiassertion,m
i ade iiby iimanagement, iimost iifrequently iiis iithat iithe iifinancial iistatements iifollow
iigenerally iiaccepted iiaccounting iiprinciples.
1-4 A iilarge iicorporation iiwith iisecurities iilisted iion iia iistock iiexchange iiis iirequired iiby iithe iirules iiof iithe
iistock iiexchange iiand ii by iithe iirules i i of ii the iiSecurities i i and iiExchange iiCommission ii to ii provide iian
iiaudit i i report i i with ii theiannual iifinancial iistatements ii furnished iito iiits ii stockholders. i i It i i also iiis
ii required iito iiengage iithe iiauditors ii to ii provide iian iiopinion iion iiits iiinternal iicontrol. iiApart iifrom iilegal
iirequirements, iihowever, iia iilarge iilisted iicorporation iirecognizes ii that ii it ii must ii maintain iiinvestor
iiconfidence iiin ii the iireliability iiof ii its ii financial iistatements i i and ii internal ii control ii over i i financial
ii reporting i i if i i it i i is i i to ii continue ii to ii be ii able ii to ii secure ii capital iifrom iithe iipublic. i i The iireport i i by iia
ii firm iiof ii certified iipublic iiaccountants ii adds ii credibility iito iithe iifinancial iistatements ii prepared ii by iithe
iicorporation. i i When iia ii small ii family-owned ii enterprise iielects ii to ii have iian iiaudit, iithe iipurpose
, ii usually iiis iito iiuse iithe iiauditors' iireport iito iisupport iian iiapplication i i for iia iibank iiloan.
ii ii
ii Principles Of Auditing And Other Assurance Services
ii ii ii ii ii ii
ii
23rd Edition By Ray Whittington Kurt
ii ii ii ii ii ii
ALL Chapters (1 - 21)
ii ii ii ii
, • Table of Contents
ii ii
Chapter ii1: iiThe iiRole iiof iithe iiPublic iiAccountant iiin iithe iiAmericanEconomy
Chapter ii2: iiProfessional iiStandards
Chapter ii3: iiProfessional iiEthics
Chapter ii4: iiLegal iiLiability iiof iiCPAs
Chapter ii5: iiAudit iiEvidence iiand iiDocumentation
Chapter ii6: iiAudit iiPlanning, iiUnderstanding iithe iiClient, iiAssessingRisks, iiand iiResponding
Chapter ii7: iiInternal iiControl
Chapter ii8: iiConsideration iiof iiInternal iiControl iiin iian iiInformationTechnology iiEnvironment
Chapter ii9: iiAudit iiSampling
Chapter ii10: iiCash iiand iiFinancial iiInvestments
Chapter ii11: iiAccounts iiReceivable, iiNotes iiReceivable, iiandRevenue
Chapter ii12: iiInventories iiand iiCost iiof iiGoods iiSold
Chapter ii13: iiProperty, iiPlant, iiand iiEquipment: iiDepreciation iiandDepletion
Chapter ii14: iiAccounts iiPayable iiand iiOther iiLiabilities
Chapter ii15: iiDebt iiand iiEquity iiCapital
Chapter ii16: iiAuditing iiOperations iiand iiCompleting iithe iiAudit
Chapter ii17: iiAuditors’ iiReports
Chapter ii18: iiIntegrated iiAudits iiof iiPublic iiCompanies
Chapter ii19: iiAdditional iiAssurance iiServices: iiHistorical iiFinancialInformation
Chapter ii20: iiAdditional iiAssurance iiServices: iiOther iiInformation
Chapter ii21: iiInternal, iiOperational, iiand iiCompliance iiAuditing
,CHAPTER 1 ii
The Role of the ii ii ii
ii Public Accountant in
ii ii
ii the
American Economy ii
Review iiQuestions
1-1 The ii―crisis iiof iicredibility‖ iilargely iiarose iifrom iithe iinumber iiof iicompanies iithat iirestated iitheir
iipreviously iiissued iifinancial ii statements i i as i i a ii result ii of i i accounting ii irregularities i i and iifraud.
i i Especially iiresponsible iiwereithe iivery iivisible iiEnron iiand ii WorldCom iifraud ii cases. ii Both ii companies
i i filed ii for ii bankruptcy iiand ii constituted iithe iilargest i i companies ii in iiAmerican ii history iito iido iiso. i i The
iiextent i i of ii the iiaccounting iiirregularities ii and iifraud iibeing ii investigated iiand ii disclosed iibrought ii into
iiquestion iithe iieffectiveness ii of ii financial iistatement ii audits. i i In iiaddition, iithe iicriminal iiconviction iiof
iiArthur iiAndersen, iiLLP, iione iiof ii the iithen iiBig ii5 ii accounting iifirms, iion iicharges ii of ii destroying
iidocuments ii related iito ii the iiEnron iicase iibrought i i into iiquestion iithe iiethics ii standards ii of ii the
iiprofession.
1-2 Assurance iiservices iiare iiprofessional iiservices iithat iienhance iithe iiquality iiof iiinformation, iior iiits
iicontext, iifor iidecision-making. iiThe iitwo iitypes iiare: ii(a) iithose iithat iiincrease iithe iireliability iiof
iiinformation iiand ii(b) iithose iithat iiinvolve iiputting iiinformation iiin iia iiform iior iicontext iithat iifacilitates
iidecision-making.
1-3 A iifinancial iistatement iiaudit ii is, iiby iifar, iithe iimost ii common iitype iiof iiattest iiengagement. i i The
iioverall iiassertion,m
i ade iiby iimanagement, iimost iifrequently iiis iithat iithe iifinancial iistatements iifollow
iigenerally iiaccepted iiaccounting iiprinciples.
1-4 A iilarge iicorporation iiwith iisecurities iilisted iion iia iistock iiexchange iiis iirequired iiby iithe iirules iiof iithe
iistock iiexchange iiand ii by iithe iirules i i of ii the iiSecurities i i and iiExchange iiCommission ii to ii provide iian
iiaudit i i report i i with ii theiannual iifinancial iistatements ii furnished iito iiits ii stockholders. i i It i i also iiis
ii required iito iiengage iithe iiauditors ii to ii provide iian iiopinion iion iiits iiinternal iicontrol. iiApart iifrom iilegal
iirequirements, iihowever, iia iilarge iilisted iicorporation iirecognizes ii that ii it ii must ii maintain iiinvestor
iiconfidence iiin ii the iireliability iiof ii its ii financial iistatements i i and ii internal ii control ii over i i financial
ii reporting i i if i i it i i is i i to ii continue ii to ii be ii able ii to ii secure ii capital iifrom iithe iipublic. i i The iireport i i by iia
ii firm iiof ii certified iipublic iiaccountants ii adds ii credibility iito iithe iifinancial iistatements ii prepared ii by iithe
iicorporation. i i When iia ii small ii family-owned ii enterprise iielects ii to ii have iian iiaudit, iithe iipurpose
, ii usually iiis iito iiuse iithe iiauditors' iireport iito iisupport iian iiapplication i i for iia iibank iiloan.
