SOLUTIONS MANUAL
Auditing and Assurance Services, 17th edition
By Alvin A. Arens, Randal J. Elder
IM
PR
ES
SI
VE
G
R
AD
ES
, Table of Content
PART 1: THE AUDITING PROFESSION
The Demand for Audit and Other Assurance Services
The CPA Profession
Audit Reports
IM
Professional Ethics
Legal Liability
PART 2: THE AUDIT PROCESS
Audit Responsibilities and Objectives
PR
Audit Evidence
Audit Planning and Materiality
Assessing the Risk of Material Misstatement
Assessing and Responding to Fraud Risks
Internal Control and Coso Framework
ES
Assessing Control Risk and Reporting on Internal Controls
Overall Audit Strategy and Audit Program
PART 3: APPLICATION OF THE AUDIT PROCESS TO THE SALES AND
COLLECTION CYCLE
SI
Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of
Transactions
Audit Sampling for Tests of Controls and Substantive Tests of Transactions
VE
Completing the Tests in the Sales and Collection Cycle: Accounts Receivable
Audit Sampling for Tests of Details of Balances
PART 4: APPLICATION OF THE AUDIT PROCESS TO OTHER CYCLES
Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of
Transactions, and Accounts Payable
G
Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts
Audit of the Payroll and Personnel Cycle
R
Audit of the Inventory and Warehousing Cycle
Audit of the Capital Acquisition and Repayment Cycle
Audit of Cash and Financial Instruments
AD
PART 5: COMPLETING THE AUDIT
Completing the Audit
PART 6: OTHER ASSURANCE AND NONASSURANCE SERVICES
Other Assurance Services
ES
Internal and Governmental Financial Auditing and Operational Auditing
, SOLUTION MANUAL FOR hgfdsfds
Auditing and Assurance Services 17th Edition
Chapter 1
IM
The Demand for Audit and Other Assurance Services
Concept Checks
PR
P. 8
1. To do an audit, there must be information in a verifiable form and some
standards (criteria) by which the auditor can evaluate the information.
Determining the degree of correspondence between information and
ES
established criteria is determining whether a given set of information is in
accordance with the established criteria. For an audit of a company’s
financial statements the criteria are U.S. generally accepted accounting
principles or International Financial Reporting Standards.
SI
2. The four primary causes of information risk are remoteness of information,
biases and motives of the provider, voluminous data, and the existence of
complex exchange transactions.
The three main ways to reduce information risk are:
VE
1. User verifies the information.
2. User shares the information risk with management.
3. Audited financial statements are provided.
P. 16
G
1. The three main types of audits are operational audits, compliance audits, and
financial statement audits. The table below summarizes the purposes and
R
nature of each type of audit.
AD
AUDITS OF
OPERATIONAL COMPLIANCE FINANCIAL
AUDITS AUDITS STATEMENTS
PURPOSE To evaluate To determine To determine
whether whether the client is whether the
ES
operating following specific overall financial
procedures are procedures set by a statements are
efficient and higher authority presented in
effective accordance with
specified criteria
(usually GAAP)
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Concept Checks (continued)
AUDITS OF
OPERATIONAL COMPLIANCE FINANCIAL
IM
AUDITS AUDITS STATEMENTS
USERS OF Management of Authority that Different groups
AUDIT organization established rules, for different
REPORT regulations, and purposes — many
PR
procedures, either outside entities
internal or external to
auditee
NATURE Highly Not standardized, Highly
nonstandard; but specific and standardized
often subjective usually objective
ES
PERFORMED
BY: Almost
CPAs Frequently Occasionally universally
GAO
SI
AUDITORS Frequently Frequently Occasionally
IRS
AUDITORS Never Universally Never
VE
INTERNAL
AUDITORS Frequently Frequently Frequently*
* Internal auditors may assist CPAs in the audit of financial statements. Internal
auditors may also audit internal financial statements for use by management.
G
2. The major differences in the scope of audit responsibilities for CPAs, GAO
auditors, IRS agents, and internal auditors are:
R
• CPAs perform audits of financial statements prepared using U.S.
GAAP or IFRS in accordance with auditing standards.
• GAO auditors perform compliance or operational audits in order to
AD
assure the Congress of the expenditure of public funds in accordance
with its directives and the law.
• IRS agents perform compliance audits to enforce the federal tax laws
as defined by Congress, interpreted by the courts, and regulated by the
IRS.
ES
• Internal auditors perform compliance or operational audits in order to
assure management or the board of directors that controls and policies
are properly and consistently developed, applied, and evaluated.
jhgfds
Auditing and Assurance Services, 17th edition
By Alvin A. Arens, Randal J. Elder
IM
PR
ES
SI
VE
G
R
AD
ES
, Table of Content
PART 1: THE AUDITING PROFESSION
The Demand for Audit and Other Assurance Services
The CPA Profession
Audit Reports
IM
Professional Ethics
Legal Liability
PART 2: THE AUDIT PROCESS
Audit Responsibilities and Objectives
PR
Audit Evidence
Audit Planning and Materiality
Assessing the Risk of Material Misstatement
Assessing and Responding to Fraud Risks
Internal Control and Coso Framework
ES
Assessing Control Risk and Reporting on Internal Controls
Overall Audit Strategy and Audit Program
PART 3: APPLICATION OF THE AUDIT PROCESS TO THE SALES AND
COLLECTION CYCLE
SI
Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of
Transactions
Audit Sampling for Tests of Controls and Substantive Tests of Transactions
VE
Completing the Tests in the Sales and Collection Cycle: Accounts Receivable
Audit Sampling for Tests of Details of Balances
PART 4: APPLICATION OF THE AUDIT PROCESS TO OTHER CYCLES
Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of
Transactions, and Accounts Payable
G
Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts
Audit of the Payroll and Personnel Cycle
R
Audit of the Inventory and Warehousing Cycle
Audit of the Capital Acquisition and Repayment Cycle
Audit of Cash and Financial Instruments
AD
PART 5: COMPLETING THE AUDIT
Completing the Audit
PART 6: OTHER ASSURANCE AND NONASSURANCE SERVICES
Other Assurance Services
ES
Internal and Governmental Financial Auditing and Operational Auditing
, SOLUTION MANUAL FOR hgfdsfds
Auditing and Assurance Services 17th Edition
Chapter 1
IM
The Demand for Audit and Other Assurance Services
Concept Checks
PR
P. 8
1. To do an audit, there must be information in a verifiable form and some
standards (criteria) by which the auditor can evaluate the information.
Determining the degree of correspondence between information and
ES
established criteria is determining whether a given set of information is in
accordance with the established criteria. For an audit of a company’s
financial statements the criteria are U.S. generally accepted accounting
principles or International Financial Reporting Standards.
SI
2. The four primary causes of information risk are remoteness of information,
biases and motives of the provider, voluminous data, and the existence of
complex exchange transactions.
The three main ways to reduce information risk are:
VE
1. User verifies the information.
2. User shares the information risk with management.
3. Audited financial statements are provided.
P. 16
G
1. The three main types of audits are operational audits, compliance audits, and
financial statement audits. The table below summarizes the purposes and
R
nature of each type of audit.
AD
AUDITS OF
OPERATIONAL COMPLIANCE FINANCIAL
AUDITS AUDITS STATEMENTS
PURPOSE To evaluate To determine To determine
whether whether the client is whether the
ES
operating following specific overall financial
procedures are procedures set by a statements are
efficient and higher authority presented in
effective accordance with
specified criteria
(usually GAAP)
jhgfds
, hgfdsfds
Concept Checks (continued)
AUDITS OF
OPERATIONAL COMPLIANCE FINANCIAL
IM
AUDITS AUDITS STATEMENTS
USERS OF Management of Authority that Different groups
AUDIT organization established rules, for different
REPORT regulations, and purposes — many
PR
procedures, either outside entities
internal or external to
auditee
NATURE Highly Not standardized, Highly
nonstandard; but specific and standardized
often subjective usually objective
ES
PERFORMED
BY: Almost
CPAs Frequently Occasionally universally
GAO
SI
AUDITORS Frequently Frequently Occasionally
IRS
AUDITORS Never Universally Never
VE
INTERNAL
AUDITORS Frequently Frequently Frequently*
* Internal auditors may assist CPAs in the audit of financial statements. Internal
auditors may also audit internal financial statements for use by management.
G
2. The major differences in the scope of audit responsibilities for CPAs, GAO
auditors, IRS agents, and internal auditors are:
R
• CPAs perform audits of financial statements prepared using U.S.
GAAP or IFRS in accordance with auditing standards.
• GAO auditors perform compliance or operational audits in order to
AD
assure the Congress of the expenditure of public funds in accordance
with its directives and the law.
• IRS agents perform compliance audits to enforce the federal tax laws
as defined by Congress, interpreted by the courts, and regulated by the
IRS.
ES
• Internal auditors perform compliance or operational audits in order to
assure management or the board of directors that controls and policies
are properly and consistently developed, applied, and evaluated.
jhgfds
