STUDY NOTES & REFERENCE GUIDE
SOLUTION MANUAL FOR
Principles Of Auditing And Other Assurance
Services
23rd Edition By Ray Whittington Kurt
ALL Chapters (1 - 21)
nolanjack - Stuvia | Page 1 of 645
, STUDY NOTES & REFERENCE GUIDE
• Table of Contents
Chapter 1: The Role of the Public Accountant in the AmericanEconomy
Chapter 2: Professional Standards
Chapter 3: Professional Ethics
Chapter 4: Legal Liability of CPAs
Chapter 5: Audit Evidence and Documentation
Chapter 6: Audit Planning, Understanding the Client, AssessingRisks, and Responding
Chapter 7: Internal Control
Chapter 8: Consideration of Internal Control in an InformationTechnology Environment
Chapter 9: Audit Sampling
Chapter 10: Cash and Financial Investments
Chapter 11: Accounts Receivable, Notes Receivable, andRevenue
Chapter 12: Inventories and Cost of Goods Sold
Chapter 13: Property, Plant, and Equipment: Depreciation andDepletion
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 Public Companies
Chapter 19: Additional Assurance Services: Historical FinancialInformation
Chapter 20: Additional Assurance Services: Other Information
Chapter 21: Internal, Operational, and Compliance Auditing
nolanjack - Stuvia | Page 2 of 645
, STUDY NOTES & REFERENCE GUIDE
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
nolanjack - Stuvia | Page 3 of 645
, STUDY NOTES & REFERENCE GUIDE
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.
nolanjack - Stuvia | Page 4 of 645
SOLUTION MANUAL FOR
Principles Of Auditing And Other Assurance
Services
23rd Edition By Ray Whittington Kurt
ALL Chapters (1 - 21)
nolanjack - Stuvia | Page 1 of 645
, STUDY NOTES & REFERENCE GUIDE
• Table of Contents
Chapter 1: The Role of the Public Accountant in the AmericanEconomy
Chapter 2: Professional Standards
Chapter 3: Professional Ethics
Chapter 4: Legal Liability of CPAs
Chapter 5: Audit Evidence and Documentation
Chapter 6: Audit Planning, Understanding the Client, AssessingRisks, and Responding
Chapter 7: Internal Control
Chapter 8: Consideration of Internal Control in an InformationTechnology Environment
Chapter 9: Audit Sampling
Chapter 10: Cash and Financial Investments
Chapter 11: Accounts Receivable, Notes Receivable, andRevenue
Chapter 12: Inventories and Cost of Goods Sold
Chapter 13: Property, Plant, and Equipment: Depreciation andDepletion
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 Public Companies
Chapter 19: Additional Assurance Services: Historical FinancialInformation
Chapter 20: Additional Assurance Services: Other Information
Chapter 21: Internal, Operational, and Compliance Auditing
nolanjack - Stuvia | Page 2 of 645
, STUDY NOTES & REFERENCE GUIDE
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
nolanjack - Stuvia | Page 3 of 645
, STUDY NOTES & REFERENCE GUIDE
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.
nolanjack - Stuvia | Page 4 of 645
