SOLUTION MANUAL FOR
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d d
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Principles Of Auditing And Other Assurance Services
ii dii dii dii d
ii dii dii
ii
d d
ALL Chapters (1 - 21)
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d d
ii ii
d d
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, Table of Contents
d d
Chapter d 1: d The d Role d of d the d Public d Accountant d in d the
d AmericanEconomy dChapter d 2: d Professional d Standards
Chapter d 3: d Professional d Ethics
Chapter d 4: d Legal d Liability d of
d
d CPAs
Chapter d 5: d Audit d Evidence d and d Documentation
Chapter d 6: d Audit d Planning, d Understanding d the d Client, d AssessingRisks, d and d Responding
Chapter d 7: d Internal d Control
d
Chapter d 8: d Consideration d of d Internal d Control d in d an d InformationTechnology
d Environment dChapter d 9: d Audit d Sampling
Chapter d 10: d Cash d and d Financial d Investments
Chapter d 11: d Accounts d Receivable, d Notes d Receivable,
d andRevenue dChapter d 12: d Inventories d and d Cost d of d Goods d Sold
Chapter d 13: d Property, d Plant, d and d Equipment: d Depreciation d andDepletion
Chapter d 14: d Accounts d Payable d and d Other d Liabilities
d
Chapter d 15: d Debt d and d Equity d Capital
Chapter d 16: d Auditing d Operations d and d Completing d the d Audit
Chapter d 17: d Auditors’ d Reports
d
Chapter d 18: d Integrated d Audits d of d Public d Companies
Chapter d 19: d Additional d Assurance d Services: d Historical
d FinancialInformation dChapter d 20: d Additional d Assurance d Services: d Other
d Information
Chapter d 21: d Internal, d Operational, d and d Compliance d Auditing
,CHAPTER 1 d
The Role of the d d d
dPublic Accountant in
d d
dthe
American Economy d
Review d Questions
1-1 The d ―crisis d of d credibility‖ d largely d arose d from d the d number d of d companies d that d restated
d their dpreviously d issued d financial d statements d as d a d result d of d accounting d irregularities
d and d fraud. dEspecially d responsible d wereiithe d very d visible d Enron d and d WorldCom d fraud d cases.
d Both d companies dfiled d for d bankruptcy d and d constituted d the d largest d companies d in
d American d history d to d do d so. d The dextent d of d the d accounting d irregularities d and d fraud
d being d investigated d and d disclosed d brought d into dquestion d the d effectiveness d of d financial
d statement d audits. d In d addition, d the d criminal d conviction d of dArthur d Andersen, d LLP, d one d of
d the d then d Big d 5 d accounting d firms, d on d charges d of d destroying ddocuments d related d to d the
d Enron d case d brought d into d question d the d ethics d standards d of d the dprofession.
1-2 Assurance d services d are d professional d services d that d enhance d the d quality d of d information, d or
d its dcontext, d for d decision-making. d The d two d types d are: d (a) d those d that d increase d the
d reliability d of dinformation d and d (b) d those d that dinvolve dputting dinformation din da dform dor dcontext
dthat d facilitates ddecision-making.
1-3 A d financial d statement d audit d is, d by d far, d the d most d common d type d of d attest
d engagement. d The doverall d assertion,iimade d by d management, d most d frequently d is d that d the
d financial d statements d follow dgenerally d accepted d accounting d principles.
1-4 A d large d corporation d with d securities d listed d on d a d stock d exchange d is d required d by d the
d rules d of d the dstock d exchange d and d by d the d rules d of d the d Securities d and d Exchange
d Commission d to d provide d an daudit d report d with d theiiannual d financial d statements d furnished
d to d its d stockholders. d It d also d is drequired d to d engage d the d auditors d to d provide d an d opinion
d on d its d internal d control. d Apart d from d legal drequirements, d however, d a d large d listed
d corporation d recognizes d that d it d must d maintain d investor dconfidence d in d the d reliability d of
d its d financial d statements d and d internal d control d over d financial dreporting d if d it d is d to
d continue d to d be d able d to d secure d capital d from d the d public. d The d report d by d a dfirm d of
d certified d public d accountants d adds d credibility d to d the d financial d statements d prepared d by
d the dcorporation. When d a d small d family-owned d enterprise d elects d to d have d an d audit,
d the d purpose
, usually d is d to d use d the d auditors' d report d to d support d an d application d for d a d bank d loan.
ii
d d
ii
Principles Of Auditing And Other Assurance Services
ii dii dii dii d
ii dii dii
ii
d d
ALL Chapters (1 - 21)
ii
d d
ii ii
d d
ii
, Table of Contents
d d
Chapter d 1: d The d Role d of d the d Public d Accountant d in d the
d AmericanEconomy dChapter d 2: d Professional d Standards
Chapter d 3: d Professional d Ethics
Chapter d 4: d Legal d Liability d of
d
d CPAs
Chapter d 5: d Audit d Evidence d and d Documentation
Chapter d 6: d Audit d Planning, d Understanding d the d Client, d AssessingRisks, d and d Responding
Chapter d 7: d Internal d Control
d
Chapter d 8: d Consideration d of d Internal d Control d in d an d InformationTechnology
d Environment dChapter d 9: d Audit d Sampling
Chapter d 10: d Cash d and d Financial d Investments
Chapter d 11: d Accounts d Receivable, d Notes d Receivable,
d andRevenue dChapter d 12: d Inventories d and d Cost d of d Goods d Sold
Chapter d 13: d Property, d Plant, d and d Equipment: d Depreciation d andDepletion
Chapter d 14: d Accounts d Payable d and d Other d Liabilities
d
Chapter d 15: d Debt d and d Equity d Capital
Chapter d 16: d Auditing d Operations d and d Completing d the d Audit
Chapter d 17: d Auditors’ d Reports
d
Chapter d 18: d Integrated d Audits d of d Public d Companies
Chapter d 19: d Additional d Assurance d Services: d Historical
d FinancialInformation dChapter d 20: d Additional d Assurance d Services: d Other
d Information
Chapter d 21: d Internal, d Operational, d and d Compliance d Auditing
,CHAPTER 1 d
The Role of the d d d
dPublic Accountant in
d d
dthe
American Economy d
Review d Questions
1-1 The d ―crisis d of d credibility‖ d largely d arose d from d the d number d of d companies d that d restated
d their dpreviously d issued d financial d statements d as d a d result d of d accounting d irregularities
d and d fraud. dEspecially d responsible d wereiithe d very d visible d Enron d and d WorldCom d fraud d cases.
d Both d companies dfiled d for d bankruptcy d and d constituted d the d largest d companies d in
d American d history d to d do d so. d The dextent d of d the d accounting d irregularities d and d fraud
d being d investigated d and d disclosed d brought d into dquestion d the d effectiveness d of d financial
d statement d audits. d In d addition, d the d criminal d conviction d of dArthur d Andersen, d LLP, d one d of
d the d then d Big d 5 d accounting d firms, d on d charges d of d destroying ddocuments d related d to d the
d Enron d case d brought d into d question d the d ethics d standards d of d the dprofession.
1-2 Assurance d services d are d professional d services d that d enhance d the d quality d of d information, d or
d its dcontext, d for d decision-making. d The d two d types d are: d (a) d those d that d increase d the
d reliability d of dinformation d and d (b) d those d that dinvolve dputting dinformation din da dform dor dcontext
dthat d facilitates ddecision-making.
1-3 A d financial d statement d audit d is, d by d far, d the d most d common d type d of d attest
d engagement. d The doverall d assertion,iimade d by d management, d most d frequently d is d that d the
d financial d statements d follow dgenerally d accepted d accounting d principles.
1-4 A d large d corporation d with d securities d listed d on d a d stock d exchange d is d required d by d the
d rules d of d the dstock d exchange d and d by d the d rules d of d the d Securities d and d Exchange
d Commission d to d provide d an daudit d report d with d theiiannual d financial d statements d furnished
d to d its d stockholders. d It d also d is drequired d to d engage d the d auditors d to d provide d an d opinion
d on d its d internal d control. d Apart d from d legal drequirements, d however, d a d large d listed
d corporation d recognizes d that d it d must d maintain d investor dconfidence d in d the d reliability d of
d its d financial d statements d and d internal d control d over d financial dreporting d if d it d is d to
d continue d to d be d able d to d secure d capital d from d the d public. d The d report d by d a dfirm d of
d certified d public d accountants d adds d credibility d to d the d financial d statements d prepared d by
d the dcorporation. When d a d small d family-owned d enterprise d elects d to d have d an d audit,
d the d purpose
, usually d is d to d use d the d auditors' d report d to d support d an d application d for d a d bank d loan.
