Test Bank For Principles of Auditing and
Other Assurance Services 23rd Edition by
Whittington & Pany|9781265221317| All
Chapters 1-21| LATEST EDITION 2026
Page | 1
, TABLE OF CONTENTS
CHAPTER 1: The Role Of The Public Accountant In The American Economy
CHAPTER 2: Professional Standards
CHAPTER 3 : Professional Ethics
CHAPTER 4: Legal Liability Of CPA
CHAPTER 5 : Audit Evidence And Documentation
CHAPTER 6: Audit Planning, Understanding The Client, Assessing Risks And Responding
CHAPTER 7 : Internal Control
CHAPTER 8: Consideration Of Internal Control In An IT Environment
CHAPTER 9 : Audit Sampling
CHAPTER 10: Cash And Financial Investments
CHAPTER 11: Accounts Receivable, Notes Receivable, And Revenue
CHAPTER 12: Inventories And Cost Of Goods Sold
CHAPTER 13: Property, Plant, And Equipment: Depreciation And Depletion
CHAPTER 14: Accounts Payable And Other Liabilities
CHAPTER 15: Debt And Equity Capital
CHAPTER 16 : Auditing Operations And Completing The Audit
CHAPTER 17 : Auditors' Reports
CHAPTER 18 : Integrated Audits Of Issuers (Public Companies)
CHAPTER 19: Additional Assurance Services: Historical Financial Information
CHAPTER 20: Additional Assurance Services: Other Information
CHAPTER 21: Internal, Operational And Compliance Auditing
Page | 2
, CHAPTER 1: The Role Of The Public Accountant In The American Economy
Review Questions
1-1 The Crisis Of Credibility Largely Arose From The Number Of Companies That Restated
Their Previously Issued Financial Statements As A Result Of Accounting Irregularities And Fraud.
Especially Responsible Were The Very Visible Enron And Worldcom Fraud Cases. Both
Companies Filed For Bankruptcy And Constituted The Largest Companies In American History To
Do So. The Extent Of The Accounting Irregularities And Fraud Being Investigated And Disclosed
Brought Into Question The Effectiveness Of Financial Statement Audits. In Addition, The Criminal
Conviction Of Arthur Andersen, LLP, One Of The Then Big 5 Accounting Firms, On Charges Of
Destroying Documents Related To The Enron Case Brought Into Question The Ethics Standards
Of The Profession.
1-2 Assurance Services Are Professional Services That Enhance The Quality Of Information,
Or Its Context, For Decision-Making. The Two Types Are: (A) Those That Increase The Reliability
Of Information And
(B) Those That Involve Putting Information In A Form Or Context That Facilitates Decision-Making.
1-3 A Financial Statement Audit Is, By Far, The Most Common Type Of Attest Engagement.
The Overall Assertion, Made By Management, Most Frequently Is That The Financial
Statements Follow Generally Accepted Accounting Principles.
1-4 A Large Corporation With Securities Listed On A Stock Exchange Is Required By The Rules
Of The Stock Exchange And By The Rules Of The Securities And Exchange Commission To Provide
An Audit Report With The Annual Financial Statements Furnished To Its Stockholders. It Also Is
Required To Engage The Auditors To Provide An Opinion On Its Internal Control. Apart From
Legal Requirements, However, A Large Listed Corporation Recognizes That It Must Maintain
Investor Confidence In The Reliability Of Its Financial Statements And Internal Control Over
Financial Reporting If It Is To Continue To Be Able To Secure Capital From The Public. The Report
By A Firm Of Certified Public Accountants Adds Credibility To The Financial
Statements Prepared By The Corporation. When A Small Family-Owned Enterprise Elects To
Have An Audit, The Purpose Usually Is To Use The Auditors' Report To Support An Application
For A Bank Loan.
1-5 A Report By An Independent Public Accountant Concerning The Fairness Of A
Company's Financial Statements Is Commonly Required In The Following Situations:
(1) Application For A Bank Loan.
Page | 3
, (2) Establishing Credit For Purchase Of Merchandise, Equipment, Or Other Assets.
(3) Reporting Operating Results, Financial Position, And Cash Flows To Absentee Owners
(Stockholders Or Partners).
(4) Issuance Of Securities By A Corporation.
(5) Annual Financial Statements By A Corporation With Securities Listed On A Stock
Exchange Or Traded Over The Counter.
(6) Sale Of An Ongoing Business.
(7) Termination Of A Partnership.
1-6 To Add Credibility To Financial Statements Is To Increase The Likelihood That They Have
Been Prepared Following The Appropriate Criteria, Usually Generally Accepted Accounting
Principles. As Such, An Increase In Credibility Results In Financial Statements That Can Be
Believed And Relied Upon By Third Parties.
1-7 Business Risk Is The Risk That The Investment Will Be Impaired Because A Company
Invested In Is Unable To Meet Its Financial Obligations Due To Economic Conditions Or Poor
Management Decisions.
Information Risk Is The Risk That The Information Used To Assess Business Risk Is Not Accurate.
Auditors Can Directly Reduce Information Risk, But Have Only Limited Effect On Business Risk.
1-8 At The Beginning Of The Century, The Principal Objective Of Auditing Was The Prevention
And Detection Of Fraud. Audit Work Centered On The Balance Sheet, Because The Income
Statement Was Regarded As Highly Confidential And Not For Public Disclosure. Today, The
Principal Objective Of Auditing Is To Form An Opinion On The Fairness Of Financial Statements
And Their Conformity With Generally Accepted Accounting Principles. But The Professional
Standards Also Require That An Audit Be Designed To Provide Reasonable Assurance Of
Detecting Material Misstatements, Due To Errors Or Fraud. Particular Emphasis Is Placed On The
Income Statement Which Is Of Great Importance To Investors. Auditing Today Also Has The
Objectives Of Meeting The Requirements Of The Securities And Exchange Commission (SEC) And
The Public Company Accounting Oversight Board For Public Companies.
1-9 The Statement Is Incorrect. The Increasing Integrated Databases Of Today, Along With
Available Audit Procedures Make Audited Entire Populations A Possibility In Many Situations.
1-10 An Operational Audit Attempts To Measure The Effectiveness And Efficiency Of A Specific
Unit Of An Organization. It Involves More Subjective Judgments Than A Compliance Audit Or An
Page | 4
Other Assurance Services 23rd Edition by
Whittington & Pany|9781265221317| All
Chapters 1-21| LATEST EDITION 2026
Page | 1
, TABLE OF CONTENTS
CHAPTER 1: The Role Of The Public Accountant In The American Economy
CHAPTER 2: Professional Standards
CHAPTER 3 : Professional Ethics
CHAPTER 4: Legal Liability Of CPA
CHAPTER 5 : Audit Evidence And Documentation
CHAPTER 6: Audit Planning, Understanding The Client, Assessing Risks And Responding
CHAPTER 7 : Internal Control
CHAPTER 8: Consideration Of Internal Control In An IT Environment
CHAPTER 9 : Audit Sampling
CHAPTER 10: Cash And Financial Investments
CHAPTER 11: Accounts Receivable, Notes Receivable, And Revenue
CHAPTER 12: Inventories And Cost Of Goods Sold
CHAPTER 13: Property, Plant, And Equipment: Depreciation And Depletion
CHAPTER 14: Accounts Payable And Other Liabilities
CHAPTER 15: Debt And Equity Capital
CHAPTER 16 : Auditing Operations And Completing The Audit
CHAPTER 17 : Auditors' Reports
CHAPTER 18 : Integrated Audits Of Issuers (Public Companies)
CHAPTER 19: Additional Assurance Services: Historical Financial Information
CHAPTER 20: Additional Assurance Services: Other Information
CHAPTER 21: Internal, Operational And Compliance Auditing
Page | 2
, CHAPTER 1: The Role Of The Public Accountant In The American Economy
Review Questions
1-1 The Crisis Of Credibility Largely Arose From The Number Of Companies That Restated
Their Previously Issued Financial Statements As A Result Of Accounting Irregularities And Fraud.
Especially Responsible Were The Very Visible Enron And Worldcom Fraud Cases. Both
Companies Filed For Bankruptcy And Constituted The Largest Companies In American History To
Do So. The Extent Of The Accounting Irregularities And Fraud Being Investigated And Disclosed
Brought Into Question The Effectiveness Of Financial Statement Audits. In Addition, The Criminal
Conviction Of Arthur Andersen, LLP, One Of The Then Big 5 Accounting Firms, On Charges Of
Destroying Documents Related To The Enron Case Brought Into Question The Ethics Standards
Of The Profession.
1-2 Assurance Services Are Professional Services That Enhance The Quality Of Information,
Or Its Context, For Decision-Making. The Two Types Are: (A) Those That Increase The Reliability
Of Information And
(B) Those That Involve Putting Information In A Form Or Context That Facilitates Decision-Making.
1-3 A Financial Statement Audit Is, By Far, The Most Common Type Of Attest Engagement.
The Overall Assertion, Made By Management, Most Frequently Is That The Financial
Statements Follow Generally Accepted Accounting Principles.
1-4 A Large Corporation With Securities Listed On A Stock Exchange Is Required By The Rules
Of The Stock Exchange And By The Rules Of The Securities And Exchange Commission To Provide
An Audit Report With The Annual Financial Statements Furnished To Its Stockholders. It Also Is
Required To Engage The Auditors To Provide An Opinion On Its Internal Control. Apart From
Legal Requirements, However, A Large Listed Corporation Recognizes That It Must Maintain
Investor Confidence In The Reliability Of Its Financial Statements And Internal Control Over
Financial Reporting If It Is To Continue To Be Able To Secure Capital From The Public. The Report
By A Firm Of Certified Public Accountants Adds Credibility To The Financial
Statements Prepared By The Corporation. When A Small Family-Owned Enterprise Elects To
Have An Audit, The Purpose Usually Is To Use The Auditors' Report To Support An Application
For A Bank Loan.
1-5 A Report By An Independent Public Accountant Concerning The Fairness Of A
Company's Financial Statements Is Commonly Required In The Following Situations:
(1) Application For A Bank Loan.
Page | 3
, (2) Establishing Credit For Purchase Of Merchandise, Equipment, Or Other Assets.
(3) Reporting Operating Results, Financial Position, And Cash Flows To Absentee Owners
(Stockholders Or Partners).
(4) Issuance Of Securities By A Corporation.
(5) Annual Financial Statements By A Corporation With Securities Listed On A Stock
Exchange Or Traded Over The Counter.
(6) Sale Of An Ongoing Business.
(7) Termination Of A Partnership.
1-6 To Add Credibility To Financial Statements Is To Increase The Likelihood That They Have
Been Prepared Following The Appropriate Criteria, Usually Generally Accepted Accounting
Principles. As Such, An Increase In Credibility Results In Financial Statements That Can Be
Believed And Relied Upon By Third Parties.
1-7 Business Risk Is The Risk That The Investment Will Be Impaired Because A Company
Invested In Is Unable To Meet Its Financial Obligations Due To Economic Conditions Or Poor
Management Decisions.
Information Risk Is The Risk That The Information Used To Assess Business Risk Is Not Accurate.
Auditors Can Directly Reduce Information Risk, But Have Only Limited Effect On Business Risk.
1-8 At The Beginning Of The Century, The Principal Objective Of Auditing Was The Prevention
And Detection Of Fraud. Audit Work Centered On The Balance Sheet, Because The Income
Statement Was Regarded As Highly Confidential And Not For Public Disclosure. Today, The
Principal Objective Of Auditing Is To Form An Opinion On The Fairness Of Financial Statements
And Their Conformity With Generally Accepted Accounting Principles. But The Professional
Standards Also Require That An Audit Be Designed To Provide Reasonable Assurance Of
Detecting Material Misstatements, Due To Errors Or Fraud. Particular Emphasis Is Placed On The
Income Statement Which Is Of Great Importance To Investors. Auditing Today Also Has The
Objectives Of Meeting The Requirements Of The Securities And Exchange Commission (SEC) And
The Public Company Accounting Oversight Board For Public Companies.
1-9 The Statement Is Incorrect. The Increasing Integrated Databases Of Today, Along With
Available Audit Procedures Make Audited Entire Populations A Possibility In Many Situations.
1-10 An Operational Audit Attempts To Measure The Effectiveness And Efficiency Of A Specific
Unit Of An Organization. It Involves More Subjective Judgments Than A Compliance Audit Or An
Page | 4
