SOLUTION,MANUAL,for,Auditing,&,Assurance,Services,A,System
atic,Approach,
12th,Edition,by,William,Messier,Jr,,Steven,Glover,,
Chapters,1,-,21,/,Complete
1
,• Table,of,Contents
Chapter,1:,An,Introduction,to,Assurance,and,Financial,Statement,Auditing
Chapter,2:,The,Financial,Statement,Auditing,Environment
Chapter,3:,Audit,Planning,,Types,of,Audit,Tests,,and,Materiality
Chapter,4:,Risk,Assessment
Chapter,5:,Evidence,and,Documentation
Chapter,6:,Internal,Control,in,a,Financial,Statement,Audit
Chapter,7:,Auditing,Internal,Control,over,Financial,Reporting
Chapter,8:,Audit,Sampling:,An,Overview,and,Application,to,Tests,of,Controls
Chapter,9:,Audit,Sampling:,An,Application,to,Substantive,Tests,of,Account,Balances
Chapter,10:,Auditing,the,Revenue,Process
Chapter,11:,Auditing,the,Purchasing,Process
Chapter,12:,Auditing,the,Human,Resource,Management,Process
Chapter,13:,Auditing,the,Inventory,Management,Process
Chapter,14:,Auditing,the,Financing/Investing,Process:Prepaid,Expenses,,Intangible,Assets,,and,Property,,Plant,,and,Equ
ipment
Chapter,15:,Auditing,the,Financing/Investing,Process:Long-
Term,Liabilities,,Stockholders’,Equity,,and,Income,Statement,Accounts
Chapter,16:,Auditing,the,Financing/Investing,Process:,Cashand,Investments
Chapter,17:,Completing,the,Audit,Engagement
Chapter,18:,Reports,on,Audited,Financial,Statements
Chapter,19:,Professional,Conduct,,Independence,,and,Quality,Management
Chapter,20:,Legal,Liability
Chapter,21:,Assurance,,Attestation,,and,Internal,Auditing,Services
2
,CHAPTER,1
AN, INTRODUCTION, TO, ASSURANCE, AND, FINANCIAL, STATEMENT, AUDITING
Answers,to,Review,Questions
1-1 The,study,of,auditing,is,more,conceptual,in,nature,compared,to,other,accounting,cours
es.,Rather,than,focusing,on,learning,the,rules,,techniques,,and,computations,required,to,prepa
re,financial,statements,,auditing,emphasizes,learning,a,framework,of,analytical,and,logical,skills,
to,evaluate,the,relevance,and,reliability,of,the,systems,and,processes,responsible,for,financial,i
nformation,,as,well,as,the,information,itself.,To,be,successful,,students,must,learn,the,framewo
rk,and,then,learn,to,use,logic,and,common,sense,in,applying,auditing,concepts,to,various,circu
mstances, and,situations.
Understanding,auditing,can,improve,the,decision,making,ability,of,consultants,,business,
managers,,and,accountants,by,providing,a,framework,for,evaluating,the,usefulness,an
d,reliability,of,information.
1-2 There,is,a,demand,for,auditing,in,a,free-
market,economy,because,the,agency,relationship,between,an,absentee,owner,and,a,manage
r,produces,a,natural,conflict,of,interest,due,to,the,information,asymmetry,that,exists,between,t
he,owner,and,manager.,As,a,result,,the,agent,agrees,to,be,monitored,as,part,of,his/her,emplo
yment,contract.,Auditing,appears,to,be,a,cost-effective,form,of,monitoring.
The,empirical,evidence,suggests,auditing,was,demanded,prior,to,government,regulation,
such,as,statutory,audit,requirements.,Additionally,,many,private,companies,and,other,entities,n
ot,subject,to,government,auditing,regulations,also,demand,auditing.
1-3 The,agency,relationship,between,an,owner,and,manager,produces,a,natural,conflict,of
,interest,because,of,differences,in,the,two,parties’,goals,and,because,of,information,asymmetr
y,that,exists,between,them.,That,is,,the,manager,generally,has,more,information,about,the,‘tru
e’,financial,position,and,results,of,operations,of,the,entity,than,the,absentee,owner,does.,If,bot
h,parties,seek,to,maximize,their,own,self-
interest,,it,is,likely,that,the,manager,will,not,act,in,the,best,interest,of,the,owner,and,may,mani
pulate,the,information,provided,to,the,owner,accordingly.
1-4 Independence,is,an,important,standard,for,auditors.,If,an,auditor,is,not,independent,o
f,the,client,,users,may,lose,confidence,in,the,auditor’s,ability,to,report,truthfully,on,the,financial,
statements,,and,the,auditor’s,work,loses,its,value.,From,an,agency,perspective,,if,the,principal
,(owner),knows,that,the,auditor,is,not,independent,,the,owner,will,not,trust,the,auditor’s,work.
Thus,,the,agent,will,not,hire,the,auditor,because,the,auditor’s,report,will,not,be,effective,in,reduc
ing,information,risk,from,the,perspective,of,the,owner.
1-5 Auditing,(broadly,defined),is,a,systematic,process,of,objectively,obtaining,and,evalu
ating,evidence,regarding ,assertions,about,economic,actions,and,events,to,ascertain,the,degr
ee,of,correspondence,between,those,assertions,and,established,criteria,and,communicating
,the,results,to,interested, users.
Assurance,is,engagement,in,which,a,practitioner,expresses,a,conclusion,designed,to,
enhance,the,degree,of,confidence,of,the,intended,users,other,than,the,responsible,party,about,t
he,outcome,of,the,evaluation,or,measurement,of,a,subject,matter,against,criteria.
Examples,of,assurance,services,are,assurance,(audit),of,financial,statements,,assuran
3
, ce,of,prospective,financial,information,,assurance,of,reporting,on,internal,control,,assurance,of,s
ustainability,reporting,,and,assurance,of,electronic,commerce.
4
atic,Approach,
12th,Edition,by,William,Messier,Jr,,Steven,Glover,,
Chapters,1,-,21,/,Complete
1
,• Table,of,Contents
Chapter,1:,An,Introduction,to,Assurance,and,Financial,Statement,Auditing
Chapter,2:,The,Financial,Statement,Auditing,Environment
Chapter,3:,Audit,Planning,,Types,of,Audit,Tests,,and,Materiality
Chapter,4:,Risk,Assessment
Chapter,5:,Evidence,and,Documentation
Chapter,6:,Internal,Control,in,a,Financial,Statement,Audit
Chapter,7:,Auditing,Internal,Control,over,Financial,Reporting
Chapter,8:,Audit,Sampling:,An,Overview,and,Application,to,Tests,of,Controls
Chapter,9:,Audit,Sampling:,An,Application,to,Substantive,Tests,of,Account,Balances
Chapter,10:,Auditing,the,Revenue,Process
Chapter,11:,Auditing,the,Purchasing,Process
Chapter,12:,Auditing,the,Human,Resource,Management,Process
Chapter,13:,Auditing,the,Inventory,Management,Process
Chapter,14:,Auditing,the,Financing/Investing,Process:Prepaid,Expenses,,Intangible,Assets,,and,Property,,Plant,,and,Equ
ipment
Chapter,15:,Auditing,the,Financing/Investing,Process:Long-
Term,Liabilities,,Stockholders’,Equity,,and,Income,Statement,Accounts
Chapter,16:,Auditing,the,Financing/Investing,Process:,Cashand,Investments
Chapter,17:,Completing,the,Audit,Engagement
Chapter,18:,Reports,on,Audited,Financial,Statements
Chapter,19:,Professional,Conduct,,Independence,,and,Quality,Management
Chapter,20:,Legal,Liability
Chapter,21:,Assurance,,Attestation,,and,Internal,Auditing,Services
2
,CHAPTER,1
AN, INTRODUCTION, TO, ASSURANCE, AND, FINANCIAL, STATEMENT, AUDITING
Answers,to,Review,Questions
1-1 The,study,of,auditing,is,more,conceptual,in,nature,compared,to,other,accounting,cours
es.,Rather,than,focusing,on,learning,the,rules,,techniques,,and,computations,required,to,prepa
re,financial,statements,,auditing,emphasizes,learning,a,framework,of,analytical,and,logical,skills,
to,evaluate,the,relevance,and,reliability,of,the,systems,and,processes,responsible,for,financial,i
nformation,,as,well,as,the,information,itself.,To,be,successful,,students,must,learn,the,framewo
rk,and,then,learn,to,use,logic,and,common,sense,in,applying,auditing,concepts,to,various,circu
mstances, and,situations.
Understanding,auditing,can,improve,the,decision,making,ability,of,consultants,,business,
managers,,and,accountants,by,providing,a,framework,for,evaluating,the,usefulness,an
d,reliability,of,information.
1-2 There,is,a,demand,for,auditing,in,a,free-
market,economy,because,the,agency,relationship,between,an,absentee,owner,and,a,manage
r,produces,a,natural,conflict,of,interest,due,to,the,information,asymmetry,that,exists,between,t
he,owner,and,manager.,As,a,result,,the,agent,agrees,to,be,monitored,as,part,of,his/her,emplo
yment,contract.,Auditing,appears,to,be,a,cost-effective,form,of,monitoring.
The,empirical,evidence,suggests,auditing,was,demanded,prior,to,government,regulation,
such,as,statutory,audit,requirements.,Additionally,,many,private,companies,and,other,entities,n
ot,subject,to,government,auditing,regulations,also,demand,auditing.
1-3 The,agency,relationship,between,an,owner,and,manager,produces,a,natural,conflict,of
,interest,because,of,differences,in,the,two,parties’,goals,and,because,of,information,asymmetr
y,that,exists,between,them.,That,is,,the,manager,generally,has,more,information,about,the,‘tru
e’,financial,position,and,results,of,operations,of,the,entity,than,the,absentee,owner,does.,If,bot
h,parties,seek,to,maximize,their,own,self-
interest,,it,is,likely,that,the,manager,will,not,act,in,the,best,interest,of,the,owner,and,may,mani
pulate,the,information,provided,to,the,owner,accordingly.
1-4 Independence,is,an,important,standard,for,auditors.,If,an,auditor,is,not,independent,o
f,the,client,,users,may,lose,confidence,in,the,auditor’s,ability,to,report,truthfully,on,the,financial,
statements,,and,the,auditor’s,work,loses,its,value.,From,an,agency,perspective,,if,the,principal
,(owner),knows,that,the,auditor,is,not,independent,,the,owner,will,not,trust,the,auditor’s,work.
Thus,,the,agent,will,not,hire,the,auditor,because,the,auditor’s,report,will,not,be,effective,in,reduc
ing,information,risk,from,the,perspective,of,the,owner.
1-5 Auditing,(broadly,defined),is,a,systematic,process,of,objectively,obtaining,and,evalu
ating,evidence,regarding ,assertions,about,economic,actions,and,events,to,ascertain,the,degr
ee,of,correspondence,between,those,assertions,and,established,criteria,and,communicating
,the,results,to,interested, users.
Assurance,is,engagement,in,which,a,practitioner,expresses,a,conclusion,designed,to,
enhance,the,degree,of,confidence,of,the,intended,users,other,than,the,responsible,party,about,t
he,outcome,of,the,evaluation,or,measurement,of,a,subject,matter,against,criteria.
Examples,of,assurance,services,are,assurance,(audit),of,financial,statements,,assuran
3
, ce,of,prospective,financial,information,,assurance,of,reporting,on,internal,control,,assurance,of,s
ustainability,reporting,,and,assurance,of,electronic,commerce.
4
