• Wrong document? Swap it for free
  • Written by students who passed
  • Immediately available after payment
  • Read online or as PDF
Sell
Where do you study
Your language
Document preview thumbnail
Preview 4 out of 435 pages
Exam (elaborations)

Solution Manual for Principles of Auditing and Other Assurance Services 22nd Edition by Ray Whittington, Kurt Pany 2024 || All Chapters ( 1 - 21 ) A+

Document preview thumbnail
Preview 4 out of 435 pages

Solution Manual for Principles of Auditing and Other Assurance Services 22nd Edition by Ray Whittington, Kurt Pany 2024 || All Chapters ( 1 - 21 ) A+

Content preview

Solution manual for
o o




oprinciples of auditing and other as
o o o o o




surance services o o




22nd edition o o




by ray whittington kurt
o o o

,CHAPTER 1 o




The Role of the Publi
o o o o




c Accountant in the
o o o




American Economy o




Reviewo Questions

1-1 Theo―crisisoofocredibility‖olargelyoaroseofromotheonumberoofocompaniesothatorestatedotheiropreviouslyoissued
ofinancialostatementso aso aoresulto ofo accountingoirregularitieso andofraud.o Especiallyoresponsibleowereotheover

yovisibleoEnronoandoWorldComofraudocases.oBothocompanieso filedoforobankruptcyoandoconstitutedotheolarg
estocompanieso inoAmericanohistoryotoodooso.o Theoextento ofotheoaccountingoirregularitieso andofraudobeingoin
vestigatedoandodisclosedobroughtointooquestionotheoeffectivenesso ofofinancialostatementoaudits.o Inoaddition,
otheocriminaloconvictionoofoArthuroAndersen,oLLP,ooneoofotheothenoBig o5oaccountingofirms,oonochargeso ofo

destroyingodocumentso relatedotootheoEnronocaseobroughtointooquestionotheoethicso standardsoofotheoprofessi
on.

1-2 Assuranceoservicesoareoprofessionaloservicesothatoenhanceotheoqualityoofoinformation,ooroitsocontext,oforo
decision-
making.oTheotwootypesoare:o(a)othoseothatoincreaseotheoreliabilityoofoinformationoando(b)othoseothatoinvolv
eoputtingoinformationoinoao formoorocontextothato facilitateso decision-making.

1-3 Aofinancialostatementoauditois,obyofar,otheomostocommonotypeoofoattestoengagement.o Theooveralloassertion,o
madeobyomanagement,omostofrequentlyoisothatotheofinancialostatementsofollowogenerallyoacceptedoaccounti
ngoprinciples.

1-4 Aolargeocorporationowithosecuritiesolistedoonoaostockoexchangeoisorequiredobyotheorulesoofotheostockoexchang
eoandobyotheoruleso ofotheoSecuritieso andoExchangeoCommissionotooprovideoanoaudito reporto withotheoannualofi
nancialostatementsofurnishedotooitsostockholders.oItoalsooisorequiredotooengageotheoauditorsotooprovideoano opi
niono onoitsointernalo control.o Apartofromolegalorequirements,o however,o ao largeo listedocorporationorecognizes
othatoito musto maintainoinvestoroconfidenceoino theoreliabilityoofoitsofinancialostatementso andointernalocontrolo

overo financialoreportingoifo ito isotoocontinueotoobeoableotoosecureocapitalofromotheopublic.oTheoreportobyoaofir
moofocertifiedopublicoaccountantsoaddsocredibilityotootheofinancialostatementsopreparedobyotheocorporation.o
Whenoaosmallofamily-
ownedoenterpriseoelectsotoohaveoanoaudit,otheopurposeousuallyoisotoouseotheoauditors'oreportotoosupporto anoapp
licationoforoaobankoloan.

,1-5 Aoreportobyoanoindependento publicoaccountanto concerningotheofairnesso ofoaocompany'so financialostatementsoi
socommonlyorequiredoinotheofollowingosituations:

(1) Applicationoforoaobankoloan.
(2) Establishingocreditoforopurchaseoofo merchandise,oequipment,oorootheroassets.
(3) Reportingooperatingoresults,o financialoposition,oandocashoflowso tooabsenteeoownerso(stockholderso
oropartners).
(4) Issuanceoofosecuritiesobyoaocorporation.
(5) Annualofinancialostatementso byoaocorporationowithosecuritieso listedoonoaostockoexchangeoorotradedo
overo theocounter.
(6) Saleoofoanoongoingobusiness.
(7) Terminationoofoaopartnership.

1-6 Tooaddocredibilityotoofinancialostatementsoisotooincreaseotheolikelihoodothatotheyohaveobeenopreparedofollo
wingotheoappropriateocriteria,ousuallyogenerallyoacceptedoaccountingoprinciples.o Asosuch,oanoincreaseoinocr
edibilityoresultsoinofinancialostatementsothatocanobeobelievedoandoreliedouponobyothirdoparties.

1-7 Businessoriskoiso theoriskothato theoinvestmento willobeoimpairedobecauseoaocompanyoinvestedoinoiso unableotoo
meetoitsofinancialoobligationsodueotooeconomicoconditionso oropooro managementodecisions.oInformationoris
koisotheo riskothatotheo informationo usedotooassesso businesso riskoiso noto accurate.o Auditorso cano directlyoredu
ceoinformationorisk,obutohaveoonlyolimitedoeffectoonobusinessorisk.

1-8 Atotheobeginningoofotheocentury,otheoprincipaloobjectiveoofoauditingowasotheopreventionoandodetectionoofofr
aud.oAuditoworkocenteredoonotheobalanceosheet,obecauseotheoincomeostatementowasoregardedoasohighlyocon
fidentialoandonoto foro publicodisclosure.o Today,o theoprincipaloobjectiveoofoauditingoiso tooformoanoopinionoon
otheofairnessoofofinancialostatementsoandotheiroconformityowithogenerallyoacceptedoaccountingoprinciples.o

Butotheoprofessionalostandardso alsoorequireothatoanoaudito beodesignedotooprovideoreasonableoassuranceoofod
etectingomaterialo misstatements,odueotooerrorsooro fraud.o Particularo emphasiso iso placedoonotheoincomeostate
mento whichoisoofogreato importanceotooinvestors.o Auditingotodayoalsoohasotheoobjectiveso ofomeetingotheorequ
irementso ofotheoSecuritieso andoExchangeoCommissiono(SEC)o andotheoPublicoCompanyoAccountingoOversi
ghto Boardoforopublicocompanies.

1-9 Theostatemento iso incorrect.oTheoincreasingointegratedodatabasesoofo today,oalongowithoavailableoaudito
procedureso makeoauditedoentireopopulationsoaopossibilityoinomanyosituations.

1-10 Anooperationaloauditoattemptsotoomeasureotheoeffectivenessoandoefficiencyoofoaospecificounitoofoanoorga
nization.o Itoinvolveso moreosubjectiveojudgmentsothanoaocomplianceoauditooroanoauditoofofinancialostate
mentsobecauseotheocriteriaoofoeffectivenessoandoefficiencyoofodepartmentaloperformanceoareonotoasoclear
lyoestablishedoasoareomanyolawsoandoregulationso orogenerallyoacceptedoaccountingoprinciples.
Theoreportopreparedoaftero completionoofoanooperationaloauditoiso usuallyodirectedotoomanagementoof
otheoorganizationoino whichotheoaudito workowaso done.




1-11 Aocomplianceoauditoisoanoauditotoodetermineowhetherofinancialoreportsoorootheroassertionsoareoinocomplian
ceowithoestablishedocriteria.oTheonecessaryoingredientsoareoverifiableodataoandotheoexistenceoofostandardso
establishedobyoanoauthoritativeobody.o Anooperationaloaudit,o onotheoothero hand,oisoaoreviewoofoaodepartmen
toorootherounitoofoaobusinesso orogovernmentaloorganizationotoomeasureotheoeffectivenessoandoefficiencyoof
o operations.o Internaloauditorso oftenoperformooperationaloauditso aso dooauditorso employedobyotheoGovernm

ento AccountabilityoOfficeo(GAO)o ofotheofederalogovernment.

1-12 Internaloauditorso mustobeoindependentoofotheodepartmentoheadsoandootherolineoexecutivesowhoseoworkotheyo
review.oHowever,ointernaloauditorsoareonotoindependentoinotheosameosenseoasoaopublicoaccountingofirm.

, Theopublicoaccountingofirmoservesomanyoclientsoandotheorevenueoobtainedofromoanyooneoclientoisoonlyoaosm
allopartoofotheorevenueoofotheofirm.o Internaloauditors,oonotheootherohand,oareoemployeeso ofooneocompany,oando
areosubjectotootheorestraintsoinherentoinotheoemployer-
employeeorelationship.o Internaloauditorso canoachieveoaogreatodealoofoindependenceobyoreportingotootheoaudit
o committeeoofotheoboardoofo directors,obutotheyocannotoachieveotheosame odegreeoofoindependenceoasoisoposse

ssedobyotheoexternalopublicoaccountingofirm.

1-13 Theointernaloauditorsoareoemployeeso ofoSpacecraft,oInc.,oandomayobeoinfluencedobyocorporateomanagement.
Theopublicoaccountingofirmoiso independento ofotheocompanyoandoisoinoaobetteropositionotootakeopositionsoopp
osedotoothoseoofocompanyomanagement.oTheoworkoofotheointernaloauditostaffoemphasizesomeasurementoofoth
eoefficiencyoandoeffectivenesso ofovariouso operatingounitso ofotheocompanyoandocomplianceowithoallotypesoofo
controls,owhereasotheopublicoaccountingofirmoisoprimarilyoconcernedowithodeterminingotheofairnessoofoSpace
craft'sofinancialostatements.

1-14 TheoGovernmento AccountabilityoOfficeo(GAO)oisoaostaffoofoprofessionaloauditorsowhichoreportsotooCongre
ss.o Itsofunctionoisotoodetermineothatoprogramsocarriedooutobyofederaloagenciesoconformotootheofinancialoauth
orizationoofotheoCongress.o Itoisoalsooconcernedowithotheocost-
effectivenessoofogovernmentoprograms.o Theoauditoactivitiesoincludeoinvestigationoofotheocostsoandoperform
anceoofocorporationso holdingogovernmento contracts.

1-15 AmongotheomanyoimportantocontributionsotooauditingoliteratureobyotheoAICPAoareotheoseriesoofoStatementso
onoAuditingoStandardso(SASs),oStatementsoonoStandardsoforoAttestationoEngagementso(SSAEs),oIndustryoA
uditoandoAccountingoGuides,oAuditoGuides,oAuditoRiskoAlerts,oStatementsoonoStandardsoforoAccountingoan
doReviewoServiceso(SSARSs),o,oandotheoCodeoofoProfessionaloConducto(onlyotwoorequired).

1-16 Aopeeroreviewoisoaocriticaloreviewoofoaopublicoaccountingofirm'sopracticesobyoanotheropublicoaccountingo
firmo(orootheroCPAsofunctioningoasoaopeeroreviewoteam).oTheopurposeoofoaopeeroreviewoisotooencourageo
adherenceotooqualityocontrolostandardso establishedobyotheoaccountingofirmoandotheoprofession.

1-17 TheoSecuritiesoandoExchangeoCommissiono(SEC)oisoanoagencyoofotheofederalogovernmentoandoisoresponsibl
eoforoadministeringoaonumberoofoacts,oincludingotheoSecuritiesoActoofo1933oandotheoSecuritiesoExchangeo Ac
to ofo1934.o Ino meetingo thisoresponsibility,o theo SECoreviewso financialo statementso ofocompaniesoofferingosec
uritiesoforosaleotootheopublic.oItoisoparticularlyoconcernedowithorequiringofullodisclosureoofofinancialoinformat
ionoandowithopreventingomisrepresentation.oThroughotheoPublicoCompanyoAccountingoOversightoBoard,oth
eoSECo nowooverseeso publicoaccountingofirmsothatoaudito publicocompanies.oIncludedoinothisooversightoproces
soincludesodevelopmentoofoauditing,oindependence,oandoqualityocontrolostandards;oinspectionoofo performanc
e;oandoenforcemento ofotheostandards.
TheoAICPAoisotheonationaloorganizationoofocertifiedopublicoaccountants.o Itohasolongobeenoaoleaderoi
noaccountingo andoauditingoresearch,o ino publicationo ofo authoritativeo accountingoando auditingopronouncem
entso andostudies,oandoinopromotingohighoprofessionalostandardso ofopractice.

1-18 Serviceso offeredobyopublicoaccountingofirmso inoadditionotooauditingoincludeootheroformso ofoattestation,otaxo
work,oconsultingoservices,olitigationosupportoservices,ofraudoinvestigationoservices,o personalofinancialoplan
ningoandoaccountingoservices.o Thisolastocategoryoincludeso preparationoofofinancialostatementso forosmalleroc
ompaniesothatohaveolimitedoaccountingopersonneloandovariousotypesoofowrite-
upowork.oPublicoaccountingofirmsoalsooperformoaovarietyoofootheroservices.o Consultingoservicesoincludeoai
dingoclientsoinotheodesignoofoaccountingosystems,oconversionotooInformationoTechnologyo(IT)osystems,opre
parationoofobudgets,oplanningobusinessocombinationsowithootherocompanies,oexecutiveosearch,oandonumero
usootheroprojects.oPublicoaccountingofirmsoareorestrictedoasotootheoconsultingoservicesothatotheyomayoprovid
eotooaudito clientso thatoareopublicocompanies.

Document information

Uploaded on
April 28, 2025
Number of pages
435
Written in
2024/2025
Type
Exam (elaborations)
Contains
Questions & answers
$20.49

Wrong document? Swap it for free Within 14 days of purchase and before downloading, you can choose a different document. You can simply spend the amount again.
Written by students who passed
Immediately available after payment
Read online or as PDF

Seller avatar
Reputation scores are based on the amount of documents a seller has sold for a fee and the reviews they have received for those documents. There are three levels: Bronze, Silver and Gold. The better the reputation, the more your can rely on the quality of the sellers work.
TUTORMcCullough
4.9
(502)
Sold
12
Followers
2
Items
485
Last sold
10 months ago

Reviews from verified buyers




Why students choose Stuvia

Created by fellow students, verified by reviews

Quality you can trust: written by students who passed their tests and reviewed by others who've used these notes.

Didn't get what you expected? Choose another document

No worries! You can instantly pick a different document that better fits what you're looking for.

Pay as you like, start learning right away

No subscription, no commitments. Pay the way you're used to via credit card and download your PDF document instantly.

Student with book image

“Bought, downloaded, and aced it. It really can be that simple.”

Alisha Student

Working on your references?

Create accurate citations in APA, MLA and Harvard with our free citation generator.

Working on your references?

Frequently asked questions