Principles of Auditing 23rd Edition Solution Manual – Whittington & Pany | All Chapters 1-21 Complete

SOLUTION MANUAL FOR
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Principles Of Auditing And Other Assurance Services
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23rd Edition By Ray Whittington Kurt
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ALL Chapters (1 - 21)
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,  Table of Contents
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ChapterN1:NTheNRoleNofNtheNPublicNAccountantNinNtheNAmericanEconomy

ChapterN2:NProfessionalNStandards

ChapterN3:NProfessionalNEthics

ChapterN4:NLegalNLiabilityNofNCPAs

ChapterN5:NAuditNEvidenceNandNDocumentation

ChapterN6:NAuditNPlanning,NUnderstandingNtheNClient,NAssessingRisks,NandNResponding

ChapterN7:NInternalNControl

ChapterN8:NConsiderationNofNInternalNControlNinNanNInformationTechnologyNEnvironment

ChapterN9:NAuditNSampling

ChapterN10:NCashNandNFinancialNInvestments

ChapterN11:NAccountsNReceivable,NNotesNReceivable,NandRevenue

ChapterN12:NInventoriesNandNCostNofNGoodsNSold

ChapterN13:NProperty,NPlant,NandNEquipment:NDepreciationNandDepletion

ChapterN14:NAccountsNPayableNandNOtherNLiabilities

ChapterN15:NDebtNandNEquityNCapital

ChapterN16:NAuditingNOperationsNandNCompletingNtheNAudit

ChapterN17:NAuditors’NReports

ChapterN18:NIntegratedNAuditsNofNPublicNCompanies

ChapterN19:NAdditionalNAssuranceNServices:NHistoricalNFinancialInformation

ChapterN20:NAdditionalNAssuranceNServices:NOtherNInformation

ChapterN21:NInternal,NOperational,NandNComplianceNAuditing

,CHAPTER 1 N




The Role of the Publ
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ic Accountant in the
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American Economy N




ReviewNQuestions

1-1 TheN―crisisNofNcredibility‖NlargelyNaroseNfromNtheNnumberNofNcompaniesNthatNrestatedNtheirNpreviously
NissuedNfinancialNstatementsN asN aN resultN ofN accountingNirregularitiesN andNfraud.N EspeciallyNresponsible

NwereNtheNveryNvisibleNEnronN andNWorldComNfraudN cases.N BothNcompaniesN filedN forN bankruptcyNandN

constitutedNtheNlargestN companiesN inNAmericanNhistoryNtoNdoNso.N TheNextentN ofNtheNaccountingNirregul
aritiesN andNfraudNbeingNinvestigatedNandNdisclosedNbroughtN intoNquestionNtheNeffectivenessN ofN financia
lNstatementN audits.N InNaddition,NtheNcriminalNconvictionNofNArthurNAndersen,NLLP,NoneNofNtheNthenNBi
gN5NaccountingNfirms,NonNchargesN ofN destroyingNdocumentsN relatedNtoNtheNEnronNcaseNbroughtN intoNq
uestionNtheNethicsN standardsN ofNtheNprofession.

1-2 AssuranceNservicesNareNprofessionalNservicesNthatNenhanceNtheNqualityNofNinformation,NorNitsNcontext
,NforNdecision-
making.NTheNtwoNtypesNare:N(a)NthoseNthatNincreaseNtheNreliabilityNofNinformationNandN(b)NthoseNtha
tNinvolveNputtingNinformationNinNaNformNorNcontextNthatNfacilitatesNdecision-making.

1-3 ANfinancialNstatementN auditN is,NbyNfar,N theNmostN commonNtypeNofN attestN engagement.N TheNoverallNass
ertion,NmadeNbyNmanagement,NmostNfrequentlyNisNthatNtheNfinancialNstatementsNfollowNgenerallyNaccept
edNaccountingNprinciples.

1-4 ANlargeNcorporationNwithNsecuritiesNlistedNonNaNstockNexchangeNisNrequiredNbyNtheNrulesNofNtheNstockNe
xchangeNandNbyNtheNrulesN ofN theNSecuritiesN andNExchangeNCommissionNtoNprovideNanNauditN reportN wit
hNtheNannualNfinancialNstatementsN furnishedNtoNitsN stockholders.N ItN alsoNisN requiredNtoNengageNtheNaudit
orsN toNprovideNanNopinionNonNitsNinternalNcontrol.NApartNfromNlegalNrequirements,Nhowever,NaNlargeN
listedNcorporationNrecognizesNthatNitN mustN maintainNinvestorNconfidenceNinNtheNreliabilityNofNitsNfinanci
alNstatementsN andN internalN controlN overN financialN reportingN ifN itN isN toN continueNtoN beNableNtoN secureNc
apitalNfromNtheNpublic.N TheNreportN byNaNfirmNofNcertifiedNpublicNaccountantsN addsN credibilityNtoNtheNfi
nancialNstatementsN preparedNbyNtheNcorporation.N WhenNaN smallNfamily-
ownedNenterpriseNelectsN toNhaveNanNaudit,NtheNpurposeNusuallyNisNtoNuseNtheNauditors'NreportNtoNsupport
N anNapplicationN forN aNbankNloan.

, 1-5 ANreportN byNanNindependentN publicNaccountantN concerningNtheNfairnessN ofNaN company'sN financialNstate
mentsNisNcommonlyNrequiredNinNtheNfollowingNsituations:

(1) ApplicationNforN aN bankNloan.
(2) EstablishingNcreditN forN purchaseNofN merchandise,Nequipment,NorN otherN assets.
(3) ReportingNoperatingNresults,N financialNposition,N andNcashNflowsN toNabsenteeNownersN (stockhol
dersNorNpartners).
(4) IssuanceNofN securitiesN byNaN corporation.
(5) AnnualNfinancialNstatementsN byNaN corporationNwithNsecuritiesN listedNonNaN stockNexchangeNorN t
radedNoverNtheNcounter.
(6) SaleNofN anNongoingNbusiness.
(7) TerminationNofN aN partnership.

1-6 ToNaddNcredibilityNtoNfinancialNstatementsN isNtoNincreaseNtheNlikelihoodNthatN theyNhaveNbeenNpreparedN
followingNtheNappropriateNcriteria,NusuallyNgenerallyNacceptedNaccountingNprinciples.N AsN such,NanNincr
easeNinNcredibilityNresultsN inNfinancialNstatementsNthatN canNbeNbelievedNandNreliedNuponNbyNthirdNpartie
s.

1-7 BusinessN riskNisN theNriskNthatN theNinvestmentN willNbeNimpairedNbecauseNaN companyNinvestedNinNisN un
ableNtoNmeetNitsNfinancialNobligationsNdueNtoNeconomicNconditionsNorNpoorNmanagementNdecisions.N In
formationNriskNisNtheNriskNthatNtheNinformationNusedNtoNassessNbusinessNriskNisNnotNaccurate.NAudit
orsNcanNdirectlyNreduceNinformationNrisk,NbutNhaveNonlyNlimitedNeffectNonNbusinessNrisk.

1-8 AtNtheNbeginningNofNtheNcentury,NtheNprincipalNobjectiveNofNauditingNwasN theNpreventionNandNdetection
NofNfraud.N AuditN workNcenteredNonNtheNbalanceNsheet,NbecauseNtheNincomeNstatementN wasN regardedNas

N highlyNconfidentialN andN notN forN publicNdisclosure.N Today,N theNprincipalN objectiveNofN auditingN isN toN f

ormNanNopinionNonNtheNfairnessN ofNfinancialNstatementsN andNtheirNconformityNwithNgenerallyNacceptedN
accountingNprinciples.N ButN theNprofessionalNstandardsN alsoNrequireNthatN anNauditN beNdesignedNtoNprovi
deNreasonableNassuranceNofNdetectingNmaterialNmisstatements,N dueNtoNerrorsN orN fraud.N ParticularN emph
asisN isN placedNonNtheNincomeNstatementN whichNisN ofNgreatN importanceNtoNinvestors.N AuditingNtodayNal
soNhasN theNobjectivesN ofNmeetingNtheNrequirementsN ofNtheNSecuritiesN andNExchangeNCommissionN(SEC
)N andNtheNPublicNCompanyNAccountingNOversightNBoardNforNpublicNcompanies.

1-9 TheNstatementN isN incorrect.N TheNincreasingNintegratedNdatabasesN ofN today,NalongNwithNavailableN
auditNproceduresNmakeNauditedNentireNpopulationsNaNpossibilityNinNmanyNsituations.

1-10 AnNoperationalNauditN attemptsN toNmeasureNtheNeffectivenessN andNefficiencyNofNaNspecificNunitN ofNa
nNorganization.N ItN involvesN moreNsubjectiveNjudgmentsN thanNaNcomplianceNauditN orNanNauditN ofNfin
ancialNstatementsN becauseNtheNcriteriaN ofN effectivenessN andNefficiencyNofN departmentalNperformanc
eNareNnotN asNclearlyNestablishedNasN areNmanyNlawsN andNregulationsNorNgenerallyNacceptedNaccountin
gNprinciples.
TheNreportN preparedNafterN completionNofN anNoperationalNauditN isN usuallyNdirectedNtoNmanage
mentNofNtheNorganizationNinNwhichNtheNauditNworkNwasNdone.

1-11 ANcomplianceNauditNisNanNauditNtoNdetermineNwhetherNfinancialNreportsNorNotherNassertionsNareN inNco
mplianceNwithNestablishedNcriteria.N TheNnecessaryNingredientsN areNverifiableNdataN andNtheNexistenceNo
fNstandardsN establishedNbyNanNauthoritativeNbody.N AnNoperationalNaudit,NonNtheNotherN hand,NisN aN revi
ewNofN aNdepartmentN orNotherNunitN ofNaNbusinessN orNgovernmentalNorganizationNtoNmeasureNtheNeffecti
venessN andNefficiencyNofN operations.N InternalNauditorsN oftenNperformNoperationalNauditsN asN doNaudito
rsN employedNbyNtheNGovernmentNAccountabilityNOfficeN(GAO)NofNtheNfederalNgovernment.

1-12 InternalNauditorsN mustN beNindependentN ofNtheNdepartmentN headsN andNotherNlineNexecutivesN whoseNwor