Auditing: A Practical Approach with Data Analytics (2nd Ed) Solution Manual – Johnson & Wiley

SOLUTION MANUAL FOR C C


AuditingCACPracticalCApproachCwithCDataCAnalytics,C2ndCEditionCRaymondCN.CJohnson,CL
auraCDavisCWiley,CRobynCMoroney,CFionaCCampbell,CJaneCHamilton

ChapterC1-16
CHAPTER 1 C


Introduction and Overview of Audit and Assurance
C C C C C C


Learning Objectives
C




1. DifferentiateCamongCassurance,Cattestation,CandCauditingCservices.
2. DescribeCtheCdifferentCtypesCofCassuranceCservices.
3. ExplainCtheCdemandCforCauditCandCassuranceCservices.
4. DiscussCtheCdifferentCrolesCofCtheCfinancialCstatementCpreparerCandCtheCauditor.
5. IdentifyCtheCrolesCofCdifferentCregulatorsCandCorganizationsCthatCaffectCtheCauditCprofession.
6. ExplainCtheCconceptsCofCreasonableCassurance,Cmateriality,CandCtheCnatureCofCanCunqual
i-Cfied/unmodifiedCreportConCtheCauditCofCfinancialCstatements.
7. ExplainCtheCconceptCofCreasonableCassuranceCandCtheCnatureCofCanCunqualifiedCreportC
onCinternalCcontrolsCoverCfinancialCreporting.
8. DiscussCtheCauditCexpectationCgap.



ANSWERS TO MULTIPLE-CHOICE QUESTIONS
C C C




1. C
LOC1,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,CSec
tion:CAssurance,CAttestation,CandCAuditCServices


2. A
LOC2,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,CSec
tion:CDifferentCAssuranceCServices


3. B
LOC2,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,CSec
tion:CDifferentCAssuranceCServices


4. C
LOC2,CBT:CC,CDifficulty:CMedium,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,C
Section:CDifferentCAssuranceCServices


5. C
LOC3,CBT:CC,CDifficulty:CMedium,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,C
Section:CDemandCforCAuditCandCAssuranceCServices

ForCInstructorCUseCOnly

,6. B
LOC4,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,CSec
tion:CPreparersCandCAuditors


7. A
LOC5,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CReporting,CSection:CTheCRoleCofCRegulatorsCandC
Regulations


8. D
LOC5,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACBC:CGovernanceCPerspective,CSection:CTheCRoleCofCR
egulatorsCandCRegulations


9. D
LOC6,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,CSec
tion:CAuditCReportConCFinancialCStatements


10. C
LOC6,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CReporting,CSection:CAuditCReportConCtheCFinancial
Statements
C




11. B
LOC7,CBT:CC,CDifficulty:CEasy,CTOT:C2Cmin.,CAACSB:CNone,CAICPACAC:CReporting,CSection:CAuditCReportConCInternalCCo
ntrolsCoverCFinancialCReporting


12. B
LOC8,CBT:CC,CDifficulty:CMedium,CTOT:C2Cmin.,CAACSB:CNone,CAICPACPC:CProfessionalCBehavior,CSection:CTheCAudit
ExpectationCGap

ANSWERS TO REVIEW QUESTIONS
C C C




R1.1CAnCassuranceCserviceCisCanyCserviceCprovidedCbyCanCindependentCpractitionerCthatCim-
CprovesCtheCqualityCofCinformation,CorCitsCcontext,CforCdecisionCmakers.CAnCindependentCpractition

erCcanCverifyCthatCtheCinformationCmeetsCrelevantCcriteria,CwhichCprovidesCassuranceCtoCusersCw
hoCintendCtoCuseCtheCinformationCforCdecisionCmaking.CAnCassuranceCengagementChasCthreeCpar
ties:CtheCassuranceCproviderC(auditor/practitioner),CtheCpartyCresponsibleCforCprovidingCtheCinfor
mationC(client),CandCtheCintendedCusersCofCtheCinformationC(investors/lenders/othersCwhoCrelyCon
CtheCin-Cformation).


LOC1,CBT:CC,CDifficulty:CEasy,CTOT:C5Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement,CSec
tion:CAssurance,CAttestation,CandCAuditCServices


R1.2CTheCcriterionCusedCinCaCfinancialCstatementCauditCtoCmeasureCandCevaluateCsubjectCmatterC
isCtheCapplicableCfinancialCreportingCframeworkCusedCbyCtheCclient.CTheCmostCcommonCframewor
k

ForCInstructorCUseCOnly

,usedCinCtheCU.S.CisCGenerallyCAcceptedCAccountingCPrinciplesC(GAAP).
LOC1,CBT:CC,CDifficulty:CEasy,CTOT:C5Cmin.,CAACSB:CNone,CAICPACAC:CMeasurementCAnalysisCandCInterpretation,CSec-
tion:CAssurance,CAttestation,CandCAuditCServices
C




R1.3CFinancialCstatementsCareCnotCguaranteedCtoCbeCfreeCfromCerrorCorCfraudCdueCtoCseveralClim
i-
Ctations.CTheseClimitationsCincludeCtheCnatureCofCfinancialCreporting,CtheCnatureCofCauditCprocedur

esCandCtheCneedCforCtheCauditCtoCbeCconductedCwithinCaCreasonableCperiodCofCtimeCandCwithinCaC
rea-
CsonableCbudget.CTheCnatureCofCfinancialCreportingCcausesClimitationsCbecauseCitCincludesCman-

Cagement‘sCjudgmentCwhenCapplyingCaccountingCstandardsCandCestimates.CTheCnatureCofCtheCa

u-
CditCproceduresCisCaClimitationCbecauseCtheCauditorsChaveCtoCrelyConCmanagementCtoCprovideCallC

theCnecessaryCdocumentationCneededCforCtheCaudit.CTheCauditorCmayCarriveCatCanCinappropriate
Ccon-

CclusionCifCinformationCisCtamperedCwithCorCexcluded.CTheClastClimitationCrefersCtoCtheClimitedCre-

CsourcesCofCtimeCandCmoneyCforCanCauditCengagement.CItCwouldCbeCimpracticalCforCauditorsCtoCe

x-
CamineCeveryCtransaction.CTherefore,CauditorsCrelyConCsamplingCmeasuresCtoCprovideCanCaccura

teCrepresentationCofCtheCpopulation,CandCsamplingCcannotCprovideCabsoluteCassurance.
LOC2,CBT:CC,CDifficulty:CMedium,CTOT:C15Cmin.,CAACSB:CNone,CAICPACAC:CRiskCAssessment,CAnalysisCandCManagement
,CSection:CDifferentCAssuranceCServices


R1.4CManagementCandCthoseCchargedCwithCgovernanceCcanCrequestCanCoperationalCauditCtoChel
pCimproveCtheCefficiencyCandCeffectivenessCofCaCcompany‘sCoperations.CAnCorganization‘sCintern
alCauditCdepartmentCtypicallyCconductsCoperationalCaudits.
LOC2,CBT:CC,CDifficulty:CEasy,CTOT:C5Cmin.,CAACSB:CNone,CAICPACBC:CGovernanceCPerspective,CSection:CDifferentCAs-
suranceCServices
C

R1.5CInvestorsCareCinterestedCinCtheCinformationCthatCfinancialCstatementsCcanCprovideCaboutCtheir
investment.CThisCincludes,CbutCisCnotClimitedCto,CinformationCregardingCtheCprofitabilityCofCtheCcom
-
Cpany,CreturnConCinvestment,CgoingCconcern/continuityCofCoperations,CandCdividendCdistributions.

CAnCindependentCauditChelpsCtoCensureCthatCtheCinformationCinCtheCfinancialCstatementsCisCcredib

leCandCofChighCquality.
LOC3,CBT:CC,CDifficulty:CEasy,CTOT:C10Cmin.,CAACSB:CNone,CAICPACBC:CGovernanceCPerspective,CSection:CDemandCforC
AuditCandCAssuranceCServices


R1.6CBothCtheCpreparerCandCtheCauditorChaveCresponsibilitiesCregardingCtheCcompany‘sCfinancia
lCstatements.CManagementC(theCpreparer)CisCinCchargeCofCpreparingCtheCfinancialCstatements.CTh
isCincludesCensuringCtheCinformationCisCpresentedCfairlyCandCinCcomplianceCwithCGAAP,CorCotherC
ap-
CplicableCfinancialCreportingCframework.CManagementCisCresponsibleCforCdesigning,Cimplementin

g,CandCmaintainingCinternalCcontrolCoverCfinancialCreporting,CasCwellCasCprovidingCauditorsCwithCal

ForCInstructorCUseCOnly

, lCtheCnecessaryCdocumentationCandCpersonnelCneededCtoCcompleteCtheCaudit.CAuditorsCareCresp
onsibleCforCprovidingCanCopinionConCwhetherCtheCfinancialCstatementsCareCpresentedCfairlyCandCi
nCaccord-
CanceCwithCtheCapplicableCfinancialCreportingCframework.CTheCthreeCresponsibilitiesCofCauditorsCa

reCtoCconductCtheCauditCinCaccordanceCwithCtheCappropriateCauditCstandards,CplanCandCperformCt
heCauditCwithCprofessionalCskepticism,CandCexerciseCprofessionalCjudgment.
LOC4,CBT:CC,CDifficulty:CMedium,CTOT:C15Cmin.,CAACSB:CNone,CAICPACAC:CReporting,CSection:CPreparersCandCAuditors




ForCInstructorCUseCOnly