STUDY NOTES & REFERENCE GUIDE
SOLUTION MANUAL FOR
Principles Of Auditing And Other Assurance
Services
23rd Edition By Ray Whittington Kurt
ALL Chapters (1 - 21)
Learndock ‑ Stuvia | Page 1 of 597
, 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
Learndock ‑ Stuvia | Page 2 of 597
, 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 werethe 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 theannual 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
Learndock ‑ Stuvia | Page 3 of 597
, STUDY NOTES & REFERENCE GUIDE
for a bank loan.
Learndock ‑ Stuvia | Page 4 of 597
SOLUTION MANUAL FOR
Principles Of Auditing And Other Assurance
Services
23rd Edition By Ray Whittington Kurt
ALL Chapters (1 - 21)
Learndock ‑ Stuvia | Page 1 of 597
, 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
Learndock ‑ Stuvia | Page 2 of 597
, 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 werethe 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 theannual 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
Learndock ‑ Stuvia | Page 3 of 597
, STUDY NOTES & REFERENCE GUIDE
for a bank loan.
Learndock ‑ Stuvia | Page 4 of 597
