Solution Manual For Auditing & Assurance Services 9th Edition by Timothy Louwers, Penelope Bagley

,ACCESS52Test52Bank52for52Auditing52&52Assurance52Services529th52Edition52Louwer
s

Chapter520152-52Auditing52and52Assurance52Services


CHAPTER5201

Auditing52and52Assurance52Services

LEARNING52OBJECTIVES


Review52Che Multiple Exercises,52Problem
ckpoints 52Choic s,52and52Simulati
e ons


1.5 2 Define52information52risk52and52explain52
how52the52financial52statement52auditing52
1,522,523 29,5231,5238 65*
process52helps52to52reduce52this52risk,52the
reby52reducing52the52cost52of52capital52for5
2a52company.



2.
4,525,526,527,528 23,5225,5228,5244,5 60,5265*
Define52and52contrast52assurance,52attestat
250
ion,52and52financial52statement52auditing52se
rvices.


3.
36,5239,5240,5241,5
Describe52and52define52the52assertions52t
245,
hat52management52makes52about52the52reco 9,5210,5211 62,5263,5267,5268,5269
46,5247,5248,5249,5
gnition,52measurement,52presentation,52and52
252,
disclosure52of52the52financial52statements52a
53,5254,5255,5257,5
nd52explain52why52auditors52use52them52as52
258,
a52focal52point52of52the52audit.
59

4.
Define52professional52skepticism52and52e 12 24,5237 61
xplain52its52key52characteristics.

5.
Describe52the52organization52of52public52a 13,5214 30,5242,5256 72
ccounting52firms52and52identify52the52variou
s52services52that52they52offer.

6.
Describe52the52audits52and52audito 15,5216,5217,5218 26,5227,5232,5234,5 64,5266
rs52in52governmental,52internal,52and52 235
operational52auditing.




1-1
Copyright52©202452McGraw-
Hill52Education.52All52rights52reserved.52No52reproduction52or52distribution52without52the52prior52writte
n52consent52of52McGraw-Hill52Education.
mynursytest.store

, 7.
List52and52explain52the52requirements52f
19,5220,5221,5222 33,5243,5251 70,5271
or52becoming52a52certified52public52accounta
nt52(CPA)52and52other52certifications52availa
ble52to52an52accounting52professional.

(*)52Item52relates52to52multiple52learning52objectives




1-2
Copyright52©202452McGraw-
Hill52Education.52All52rights52reserved.52No52reproduction52or52distribution52without52the52prior52writte
n52consent52of52McGraw-Hill52Education.
mynursytest.store

, ACCESS52Test52Bank52for52Auditing52&52Assurance52Services529th52Edition52Louwer
s

Chapter520152-52Auditing52and52Assurance52Services

SOLUTIONS52FOR52REVIEW52CHECKPOINTS
1.1 Business52risk52is52the52risk52that52an52entity52will52fail52to52meet52its52business52objectives.52When52as
sessing52business52risk,52a52professional52must52consider52all52possible52threats52to52an52entity’s52goals
52and52objectives.52Some52illustrative52examples52include52the52risk52that:521)52its52existing52customers
52will52start52buying52products52or52services52from52its52primary52competitors;522)52its52product52lines52
will52become52obsolete;523)52its52taxes52will52increase;524)52key52government52contracts52will52be52lost;
525)52key52employees52will52leave52the52entity;52and52many52other52examples52exist.

1.2 To52help52minimize52business52risk52and52take52advantage52of52other52opportunities52presented52in52to
day’s52competitive52business52environment,52decision52makers52such52as52chief52executive52officers52(
CEOs)52demand52timely,52relevant,52and52reliable52information.52There52are52at52least52four52environm
ental52conditions52that52increase52demand52for52reliable52information.52First,52complexity52which52impl
ies52that52events52and52transactions52in52today’s52global52business52environment52can52be52complicated
.52Most52investors52do52not52have52the52level52of52expertise52needed52to52properly52account52for52com
plex52transactions.52Second52is52remoteness52which52implies52that52decision52makers52are52often52separ
ated52from52current52and52potential52business52relationships52due52to52distance52and52time.52For52examp
le,52investors52may52not52be52able52to52visit52distant52locations52to52check52up52on52their52investments.
52Third52is52time-sensitivity52which
implies52that52in52today’s52economic52environment,52investors52and52other52users52of52financial52statem
ents52need52to52make52decisions52more52rapidly52than52ever52before.52As52a52result,52the52ability52to52
promptly52obtain52high-
quality52information52is52essential.52Fourth52is52a52consequence52which52implies52that52decisions52may
52very52well52involve52significant52investments.52As52a52result,52the52consequences52can52be52severe52i
f52information52cannot52be52obtained

1.3 Of52all52the52different52risks52discussed52in52the52chapter52up52to52this52point,52information52risk52is
52the52one52that52is52most52likely52to52create52the52demand52for52independent52and52objective52assu
rance52services52is52information52risk52or52the52probability52that52the52information52circulated52by52
an52entity52will52be52false52or52misleading.52Because52the52primary52source52of52information52for52
investors52and52creditors52is52the52company52itself,52an52incentive52exists52for52that
company’s52management52to52make52their52business52or52service52appear52to52be52better52than52it52actu
ally52may52be,52to52put52their52best52foot52forward.52As52a52result,52preparers52and52issuers52of52financ
ial52information52(directors,52managers,52accountants,52and52other52people52employed52in52a52business)
52might52benefit52by52giving52false,52misleading,52or52overly52optimistic52information.52This52potential
52conflict52of52interest52between52information52providers52and52users52which52provides52the52underlyin
g52basis52for52the52demand52for52reliable52information.

1.4 The52four52major52elements52of52the52broad52definition52of52assurance52services52are

Independence.52CPAs52want52to52preserve52their52reputation52and52competitive52advantage52by52always5
2preserving52integrity52and52objectivity52when52performing52assurance52services.

Professional52services.52Virtually52all52work52performed52by52CPAs52is52defined52as52“professional52se
rvices”52as52long52as52it52involves52some52element52of52judgment52based52on52education52and52experi
ence.

Improving52the52quality52of52information52or52its52context.52The52emphasis52is52on52“information,”52CP
As’52traditional52area52of52expertise.52CPAs52can52enhance52quality52by52assuring52users52about52the52
reliability52and52relevance52of52information,52and52these52two52features52are52closely52related52to52the5
2familiar52credibility-lending52products52of
attestation52and52audit52services.52“Context”52is52relevance52in52a52different52light.52For52assurance52se
rvices,52improving52the52context52of52information52refers52to52improving52its52usefulness52when52target
ed52to52particular52decision52makers52in52the52surroundings52of52particular52decision52problems.

1-3
Copyright52©202452McGraw-
Hill52Education.52All52rights52reserved.52No52reproduction52or52distribution52without52the52prior52writte
n52consent52of52McGraw-Hill52Education.
mynursytest.store