Solution Manual for Principles of Auditing and Other Assurance Services (23rd Edition) by Whittington & Pany question and answers latest

SOLUTION MANUAL FOR
H Principles Of Auditing And Other Assurance Services

23rd Edition By Ray Whittington Kurt
ALL Chapters (1 - 21)

, • Table of Contents
ChapterH1:HTheHRoleHofHtheHPublicHAccountantHinHtheHAmericanEconomy

ChapterH2:HProfessionalHStandards

ChapterH3:HProfessionalHEthics

ChapterH4:HLegalHLiabilityHofHCPAs

ChapterH5:HAuditHEvidenceHandHDocumentation

ChapterH6:HAuditHPlanning,HUnderstandingHtheHClient,HAssessingRisks,HandHResponding

ChapterH7:HInternalHControl

ChapterH8:HConsiderationHofHInternalHControlHinHanHInformationTechnologyHEnvironment

ChapterH9:HAuditHSampling

ChapterH10:HCashHandHFinancialHInvestments

ChapterH11:HAccountsHReceivable,HNotesHReceivable,HandRevenue

ChapterH12:HInventoriesHandHCostHofHGoodsHSold

ChapterH13:HProperty,HPlant,HandHEquipment:HDepreciationHandDepletion

ChapterH14:HAccountsHPayableHandHOtherHLiabilities

ChapterH15:HDebtHandHEquityHCapital

ChapterH16:HAuditingHOperationsHandHCompletingHtheHAudit

ChapterH17:HAuditors’HReports

ChapterH18:HIntegratedHAuditsHofHPublicHCompanies

ChapterH19:HAdditionalHAssuranceHServices:HHistoricalHFinancialInformation

ChapterH20:HAdditionalHAssuranceHServices:HOtherHInformation

ChapterH21:HInternal,HOperational,HandHComplianceHAuditing

,CHAPTER 1 H




The Role of the Publ
H H H H




ic Accountant in the
H H H




American Economy H




ReviewHQuestions

1-1 TheH―crisisHofHcredibility‖HlargelyHaroseHfromHtheHnumberHofHcompaniesHthatHrestatedHtheirHpreviouslyHis
suedHfinancialHstatementsH asH aH resultH ofH accountingHirregularitiesH andHfraud.H EspeciallyHresponsibleHwer
eHtheHveryHvisibleHEnronHandHWorldComHfraudHcases.HBothHcompaniesH filedHforH bankruptcyHandHconstitu
tedHtheHlargestH companiesH inHAmericanHhistoryHtoHdoHso.H TheHextentH ofHtheHaccountingHirregularitiesH an
dHfraudHbeingHinvestigatedHandHdisclosedHbroughtH intoHquestionHtheHeffectivenessH ofHfinancialHstatementH
audits.H InHaddition,HtheHcriminalHconvictionHofHArthurHAndersen,HLLP,HoneHofHtheHthenHBigH5Haccountin
gHfirms,HonHchargesH ofH destroyingHdocumentsH relatedHtoHtheHEnronHcaseHbroughtH intoHquestionHtheHethics
H standardsH ofHtheHprofession.




1-2 AssuranceHservicesHareHprofessionalHservicesHthatHenhanceHtheHqualityHofHinformation,HorHitsHcontext,Hf
orHdecision-
making.HTheHtwoHtypesHare:H(a)HthoseHthatHincreaseHtheHreliabilityHofHinformationHandH(b)HthoseHthatHi
nvolveHputtingHinformationHinHaHformHorHcontextHthatHfacilitatesHdecision-making.

1-3 AHfinancialHstatementH auditH is,HbyHfar,HtheHmostH commonHtypeHofH attestH engagement.H TheHoverallHasserti
on,HmadeHbyHmanagement,HmostHfrequentlyHisHthatHtheHfinancialHstatementsHfollowHgenerallyHacceptedHac
countingHprinciples.

1-4 AHlargeHcorporationHwithHsecuritiesHlistedHonHaHstockHexchangeHisHrequiredHbyHtheHrulesHofHtheHstockHexc
hangeHandHbyHtheHrulesH ofH theHSecuritiesH andHExchangeHCommissionHtoHprovideHanHauditH reportH withHth
eHannualHfinancialHstatementsH furnishedHtoHitsH stockholders.H ItH alsoHisH requiredHtoHengageHtheHauditorsH toH
provideHanHopinionHonHitsHinternalHcontrol.HApartHfromHlegalHrequirements,Hhowever,HaHlargeHlistedHcor
porationHrecognizesHthatHitHmustHmaintainHinvestorHconfidenceHinHtheHreliabilityHofHitsHfinancialHstatement
sH andH internalH controlH overH financialH reportingH ifH itH isH toH continueHtoH beHableHtoH secureHcapitalHfromHthe
Hpublic.H TheHreportH byHaH firmHofH certifiedHpublicHaccountantsH addsH credibilityHtoHtheHfinancialHstatements

H preparedHbyHtheHcorporation.H WhenHaH smallHfamily-

ownedHenterpriseHelectsH toHhaveHanHaudit,HtheHpurposeHusuallyHisHtoHuseHtheHauditors'HreportHtoHsupportHa
nHapplicationH forHaHbankHloan.

, 1-5 AHreportH byHanHindependentH publicHaccountantH concerningHtheHfairnessH ofHaH company'sH financialHstateme
ntsHisHcommonlyHrequiredHinHtheHfollowingHsituations:

(1) ApplicationHforH aH bankHloan.
(2) EstablishingHcreditH forH purchaseHofH merchandise,Hequipment,HorH otherH assets.
(3) ReportingHoperatingHresults,H financialHposition,H andHcashHflowsH toHabsenteeHownersH (stockhold
ersHorHpartners).
(4) IssuanceHofH securitiesH byHaH corporation.
(5) AnnualHfinancialHstatementsH byHaH corporationHwithHsecuritiesH listedHonHaH stockHexchangeHorH tra
dedHoverHtheHcounter.
(6) SaleHofH anHongoingHbusiness.
(7) TerminationHofH aH partnership.

1-6 ToHaddHcredibilityHtoHfinancialHstatementsH isHtoHincreaseHtheHlikelihoodHthatH theyHhaveHbeenHpreparedHfol
lowingHtheHappropriateHcriteria,HusuallyHgenerallyHacceptedHaccountingHprinciples.H AsH such,HanHincreaseHi
nHcredibilityHresultsH inHfinancialHstatementsHthatH canHbeHbelievedHandHreliedHuponHbyHthirdHparties.

1-7 BusinessH riskHisH theHriskHthatH theHinvestmentH willHbeHimpairedHbecauseHaH companyHinvestedHinHisH unabl
eHtoHmeetHitsHfinancialHobligationsHdueHtoHeconomicHconditionsHorHpoorHmanagementHdecisions.HInforma
tionHriskHisHtheHriskHthatHtheHinformationHusedHtoHassessHbusinessHriskHisHnotHaccurate.HAuditorsHcanHd
irectlyHreduceHinformationHrisk,HbutHhaveHonlyHlimitedHeffectHonHbusinessHrisk.

1-8 AtHtheHbeginningHofHtheHcentury,HtheHprincipalHobjectiveHofHauditingHwasH theHpreventionHandHdetectionHof
Hfraud.H AuditH workHcenteredHonHtheHbalanceHsheet,HbecauseHtheHincomeHstatementH wasH regardedHasH highl

yHconfidentialHandHnotH forH publicHdisclosure.H Today,H theHprincipalHobjectiveHofH auditingHisH toHformHanH
opinionHonHtheHfairnessH ofHfinancialHstatementsH andHtheirHconformityHwithHgenerallyHacceptedHaccounting
Hprinciples.H ButH theHprofessionalH standardsH alsoH requireHthatH anH auditH beHdesignedH toHprovideHreasonable

HassuranceHofH detectingH materialH misstatements,H dueHtoH errorsH orH fraud.H ParticularH emphasisH isH placedH o

nHtheHincomeHstatementH whichHisH ofHgreatH importanceHtoHinvestors.H AuditingHtodayHalsoHhasH theHobjectiv
esH ofHmeetingHtheHrequirementsH ofHtheHSecuritiesH andHExchangeHCommissionH(SEC)H andHtheHPublicHCom
panyHAccountingHOversightHBoardHforHpublicHcompanies.

1-9 TheHstatementH isH incorrect.H TheHincreasingHintegratedHdatabasesH ofH today,HalongHwithHavailableHau
ditHproceduresHmakeHauditedHentireHpopulationsHaHpossibilityHinHmanyHsituations.

1-10 AnHoperationalHauditH attemptsH toHmeasureHtheHeffectivenessH andHefficiencyHofHaHspecificHunitH ofHanHo
rganization.H ItHinvolvesH moreHsubjectiveHjudgmentsHthanHaHcomplianceHauditH orHanHauditH ofHfinancial
HstatementsH becauseHtheHcriteriaH ofH effectivenessH andHefficiencyHofH departmentalHperformanceHareHno

tH asHclearlyHestablishedHasH areHmanyHlawsH andHregulationsHorHgenerallyHacceptedHaccountingHprinciple
s.
TheHreportH preparedHafterH completionHofH anHoperationalHauditH isH usuallyHdirectedHtoHmanageme
ntHofHtheHorganizationHinHwhichHtheHauditHworkHwasHdone.

1-11 AHcomplianceHauditHisHanHauditHtoHdetermineHwhetherHfinancialHreportsHorHotherHassertionsHareH inHcomp
lianceHwithHestablishedHcriteria.H TheHnecessaryHingredientsH areHverifiableHdataH andHtheHexistenceHofHsta
ndardsH establishedHbyHanHauthoritativeHbody.H AnHoperationalHaudit,HonHtheHotherH hand,HisH aH reviewHofH
aHdepartmentH orHotherHunitH ofHaHbusinessH orHgovernmentalHorganizationHtoHmeasureHtheHeffectivenessH an
dHefficiencyHofH operations.H InternalHauditorsH oftenHperformHoperationalHauditsH asH doHauditorsH employed
HbyHtheHGovernment HAccountability HOfficeH(GAO) HofHtheHfederal Hgovernment.




1-12 InternalHauditorsH mustH beHindependentH ofHtheHdepartmentH headsH andHotherHlineHexecutivesH whoseHworkHt
heyHreview.HHowever,HinternalHauditorsHareHnotHindependentHinHtheHsameHsenseHasHaHpublicHaccountingHfi