TEST BANK For Auditing & Assurance Services: A Systematic Approach, 12th Edition Chapters 1 - 21 Complete

SOLUTION MANUAL for Auditing & Assurance Services A
Systematic Approach

12th Edition by William Messier Jr, Steven Glover,
Chapters 1 - 21 / Complete




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,• Table59of59Contents
Chapter591:59An59Introduction59to59Assurance59and59Financial59Statement59Auditing

Chapter592:59The59Financial59Statement59Auditing59Environment

Chapter593:59Audit59Planning,59Types59of59Audit59Tests,59and59Materiality

Chapter594:59Risk59Assessment

Chapter595:59Evidence59and59Documentation

Chapter596:59Internal59Control59in59a59Financial59Statement59Audit

Chapter597:59Auditing59Internal59Control59over59Financial59Reporting

Chapter598:59Audit59Sampling:59An59Overview59and59Application59to59Tests59of59Controls

Chapter599:59Audit59Sampling:59An59Application59to59Substantive59Tests59of59Account59Balances

Chapter5910:59Auditing59the59Revenue59Process

Chapter5911:59Auditing59the59Purchasing59Process

Chapter5912:59Auditing59the59Human59Resource59Management59Process

Chapter5913:59Auditing59the59Inventory59Management59Process

Chapter5914:59Auditing59the59Financing/Investing59Process:Prepaid59Expenses,59Intangible59Assets,59and59Property,59Pl
ant,59and59Equipment

Chapter5915:59Auditing59the59Financing/Investing59Process:Long-
Term59Liabilities,59Stockholders’59Equity,59and59Income59Statement59Accounts

Chapter5916:59Auditing59the59Financing/Investing59Process:59Cashand59Investments

Chapter5917:59Completing59the59Audit59Engagement

Chapter5918:59Reports59on59Audited59Financial59Statements

Chapter5919:59Professional59Conduct,59Independence,59and59Quality59Management

Chapter5920:59Legal59Liability

Chapter5921:59Assurance,59Attestation,59and59Internal59Auditing59Services
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,CHAPTER591

AN5 9 INTRODUCTION5 9 TO5 9 ASSURANCE5 9 AND5 9 FINANCIAL5 9 STATEMENT5 9 AUDITING

Answers59to59Review59Questions

1-1 The59study59of59auditing59is59more59conceptual59in59nature59compared59to59other59ac
counting59courses.59Rather59than59focusing59on59learning59the59rules,59techniques,59and59co
mputations59required59to59prepare59financial59statements,59auditing59emphasizes59learning59a5
9framework59of59analytical59and59logical59skills59to59evaluate59the59relevance59and59reliability59
of59the59systems59and59processes59responsible59for59financial59information,59as59well59as59th
e59information59itself.59To59be59successful,59students59must59learn59the59framework59and59th
en59learn59to59use59logic59and59common59sense59in59applying59auditing59concepts59to59vario
us59circumstances59 and59situations.
Understanding59auditing59can59improve59the59decision59making59ability59of59consultant
s,59business59managers,59and59accountants59by59providing59a59framework 59for59evalu
ating59the59usefulness59and59reliability59of59information.

1-2 There59is59a59demand59for59auditing59in59a59free-
market59economy59because59the59agency59relationship59between59an59absentee59owner59a
nd59a59manager59produces59a59natural59conflict59of59interest59due59to59the59information59as
ymmetry59that59exists59between59the59owner59and59manager.59As59a59result,59the59agent59ag
rees59to59be59monitored59as59part59of59his/her59employment59contract.59Auditing59appears59t
o59be59a59cost-effective59form59of59monitoring.
The59empirical59evidence59suggests59auditing59was59demanded59prior59to59government
59regulation59such59as59statutory59audit59requirements.59Additionally,59many59private59compan
ies59and59other59entities59not59subject59to59government59auditing59regulations59also59deman
d59auditing.

1-3 The59agency59relationship59between59an59owner59and59manager59produces59a59natu
ral59conflict59of59interest59because59of59differences59in59the59two59parties’59goals59and59bec
ause59of59information59asymmetry59that59exists59between59them.59That59is,59the59manager59g
enerally59has59more59information59about59the59‘true’59financial59position59and59results59of59op
erations59of59the59entity59than59the59absentee59owner59does.59If59both59parties59seek59to59
maximize59their59own59self-
interest,59it59is59likely59that59the59manager59will59not59act59in59the59best59interest59of59the59o
wner59and59may59manipulate59the59information59provided59to59the59owner59accordingly.

1-4 Independence59is59an59important59standard59for59auditors.59If59an59auditor59is59not5
9independent59of59the59client,59users59may59lose59confidence59in59the59auditor’s59ability59to59r
eport59truthfully59on59the59financial59statements,59and59the59auditor’s59work59loses59its59valu
e.59From59an59agency59perspective,59if59the59principal59(owner)59knows59that59the59auditor59i
s59not59independent,59the59owner59will59not59trust59the59auditor’s59work.
Thus,59the59agent59will59not59hire59the59auditor59because59the59auditor’s59report59will59not59be
59effective59in59reducing59information59risk59from59the59perspective59of59the59owner.


1-5 Auditing59(broadly59defined)59is59a59systematic59process59of59objectively59obtainin
g59and59evaluating59evidence59regarding59assertions59about59economic59actions59and59eve
nts59to59ascertain59the59degree59of59correspondence59between59those59assertions59and59est
ablished59criteria59and59communicating59the59results59to59interested59 users.
Assurance59is59engagement59in59which59a59practitioner59expresses59a59conclusion59
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, designed59to59enhance59the59degree59of59confidence59of59the59intended59users59other59than59
the59responsible59party59about59the59outcome59of59the59evaluation59or59measurement59of59a59
subject59matter59against59criteria.
Examples59of59assurance59services59are59assurance59(audit)59of59financial59statement
s,59assurance59of59prospective59financial59information,59assurance59of59reporting59on59internal
59control,59assurance59of59sustainability59reporting,59and59assurance59of59electronic59commerc
e.




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