SOLUTION MANUAL for Auditing & Assurance Services A Systematic Approach 12th Edition By William Messier Jr, Steven Glover, Chapters 1 to 21 / Complete

SOLUTION MANUAL
Auditing & Assurance Services A Systematic Approach

12th Edition By William Messier Jr, Steven Glover,

Chapters 1 - 21 / Complete




1

,• Table of Contents
g g




Chapterg1:gAngIntroductiongtogAssurancegandgFinancialgStatementgAuditing

Chapterg2:gThegFinancialgStatementgAuditinggEnvironment

Chapterg3:gAuditgPlanning,gTypesgofgAuditgTests,gandgMateriality

Chapterg4:gRiskgAssessment

Chapterg5:gEvidencegandgDocumentation

Chapterg6:gInternalgControlgingagFinancialgStatementgAudit

Chapterg7:gAuditinggInternalgControlgovergFinancialgReporting

Chapterg8:gAuditgSampling:gAngOverviewgandgApplicationgtogTestsgofgControls

Chapterg9:gAuditgSampling:gAngApplicationgtogSubstantivegTestsgofgAccountgBalances

Chapterg10:gAuditinggthegRevenuegProcess

Chapterg11:gAuditinggthegPurchasinggProcess

Chapterg12:gAuditinggthegHumangResourcegManagementgProcess

Chapterg13:gAuditinggthegInventorygManagementgProcess

Chapterg14:gAuditinggthegFinancing/InvestinggProcess:PrepaidgExpenses,gIntangiblegAssets,gandgProperty,gPlant,gan
dgEquipment

Chapterg15:gAuditinggthegFinancing/InvestinggProcess:Long-
TermgLiabilities,gStockholders’gEquity,gandgIncomegStatementgAccounts

Chapterg16:gAuditinggthegFinancing/InvestinggProcess:gCashandgInvestments

Chapterg17:gCompletinggthegAuditgEngagement

Chapterg18:gReportsgongAuditedgFinancialgStatements

Chapterg19:gProfessionalgConduct,gIndependence,gandgQualitygManagement

Chapterg20:gLegalgLiability


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,Chapterg21:gAssurance,gAttestation,gandgInternalgAuditinggServices


CHAPTER g 1

ANg INTRODUCTIONg TOg ASSURANCEg ANDg FINANCIALg STATEMENTg AUDITING

Answersg tog Review g Questions

1-1 Theg studyg ofg auditinggisg moregconceptualg ingnatureg comparedgtog otherg accountingg courses.g
Rathergthangfocusingg ong learningg theg rules,gtechniques,g andgcomputationsg requiredg tog preparegfinan
cialgstatements,gauditinggemphasizesglearninggagframeworkgofganalyticalgandglogicalgskillsgtog evaluateg
theg relevanceg andg reliabilityg ofgthegsystemsgandgprocessesg responsiblegforgfinancialginformation,g asg
wellg asgtheg informationg itself.g Tog beg successful,g studentsg mustg learngtheg frameworkg andgtheng learngt
og useg logicg andg common g senseg ing applyingg auditingg conceptsgtog variousgcircumstancesg andgsituation
s.
Understanding gauditinggcangimprovegthegdecision gmakinggabilitygofgconsultants,gbusinessgma
nagers,gandg accountantsgbyg providingg agframeworkg forg evaluatinggtheg usefulnessg andgreliabi
lityg ofg information.

1-2 Thereg isgag demand gforg auditingging agfree-
marketg economyg becausegtheg agencyg relationshipgbetweeng ang absenteeg ownerg andg ag managerg pro
ducesg ag naturalg conflictg ofg interestg dueg togtheg informationg asymmetrygthatg existsg betweengtheg own
erg andg manager.g Asg ag result,gthegagentg agreesgtog beg monitoredg asgpartg ofg his/hergemploymentgcontr
act.g Auditingg appearsgtog beg agc ost-effectivegformg ofg monitoring.
The gempiricalgevidencegsuggestsgauditinggwasgdemandedgpriorgtoggovernmentgregulationgsuc
hg asgstatutoryg auditg requirements. g Additionally,g manygprivategcompaniesg andg otherg entitiesg notg sub
jectg tog governmentg auditinggregulationsg alsogdemandgauditing.

1-3 Theg agencygrelationshipgbetweeng ang ownerg andg managergproducesg agnaturalgconflictg ofgint
erestgbecauseg ofg differencesgingthegtwog parties’g goalsgandg becauseg ofginformationg asymmetrygt hatge
xistsg betweengthem.g Thatg is,g theg managerg generallyg hasg moreg informationg aboutgtheg‘true’gf inancial
gpositiong andgresultsg ofg operationsg ofgthegentitygthan gtheg absentee g ownergdoes.g Ifgboth gpartiesgseek

gtog maximize gtheirg own g self-

interest,g itgisg likelygthatgtheg managerg willg notg actgingtheg bestg interestg ofgtheg ownerg andg mayg manipul
ategtheginformationg providedgtog theg ownerg accordingly.

1-4 Independenceg isgang importantgstandardgforg auditors.gIfg ang auditorgisg notg independentg ofgt
hegclient,g usersg maygloseg confidencegingtheg auditor’sg abilitygtog reportgtruthfullyg ongthegfinancialg stat
ements,g andgtheg auditor’sg workg losesg itsgvalue.g From gangagencyg perspective,g ifgtheg principalg(owne
r)gknowsgthat gthegauditorgisgnotgindependent,gthegownerg willg notgtrustgthegauditor’sg work.
Thus,gthegagentgwillgnotghiregthegauditorgbecausegthegauditor’sgreport gwillgnot gbegeffectivegingreducin
gginformationg riskg fromgtheg perspectiveg ofgtheg owner.

1-5 Auditingg (broadlygdefined)g isg agsystematicgprocessg of gobjectivelyg obtainingg andg evaluatin
ggevidencegregardinggassertionsgaboutgeconomicgactionsgand geventsgtogascertain gthegd egreeg ofgcorr
espondenceg betweengthoseg assertionsg andgestablishedgcriteriag andg communicatinggtheg resultsg togi
nterestedg users.
Assurance g isgengagementg ing whichgag practitionergexpressesg ag conclusiong designedgtog enhanc
egthegdegreegofgconfidencegofgthegintended gusersgothergthangthegresponsiblegpartygaboutgt he goutcom
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, egofgthegevaluationg org measurementg ofg agsubjectg matterg againstgcriteria.
Examplesg ofg assurancegservicesgareg assuranceg(audit)g ofgfinancialgstatements,g assurancegofgpr
ospectivegfinancialginformation,gassurancegofgreportinggonginternalgcontrol,gassuranceg ofgsustainabilit
ygreporting,g and gassurance gofg electronicgcommerce.




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