TEST BANK For Auditing & Assurance Services: A Systematic Approach, 12th Edition By William Messier Jr, Steven Glover, Verified Chapters 1 - 21, Complete Newest Version 2024 UPDATE
TEST BANK FOR Auditing & Assurance Services: A sustematic Approach, 12th Edition By William Messier Jr, Stephen Glover, Complete Chapter 1-21 | Newest Version.
SOLUTION MANUALFOR Auditing & Assurance Services A Systematic Approach 12edition Messier Chapter 1-21
All for this textbook (9)
Written for
Auditing & Assurance Services A Systematic Approac
All documents for this subject (3)
Seller
Follow
ASolution
Reviews received
Content preview
Instructor Manual For
Auditing & Assurance Services A Systematic Approach 12e
Messier
Chapter 1
An Introduction to Assurance and Financial Statement Auditing
Internet
Multiple- Assignments/
Review Discussion
Learning Objectives Choice Problems EarthWear
Questions Cases
Questions Mini-Cases
(EWMC)
LO 1-1: Understand why
studying auditing can be valuable
to you whether or not you plan to
become an auditor, and why it is
1 29 30
different from studying
accounting.
LO 1-2: Understand the demand
for auditing and be able to explain
the desired characteristics of
2,3,4 13,14,20 24,25 29
auditors and audit services.
LO 1-3: Know the basic
definition of a financial statement 5,6 13,14,15,16 25
audit.
LO 1-4: Understand three
fundamental concepts that
underlie financial statement
7 17,18 25
auditing.
LO 1-5: Understand why
sampling is important in an audit.
8
LO 1-6: Be able to describe the
basic financial statement auditing EWMC
process and the phases in which
9, 10 17,19,20 26
an audit is carried out.
LO 1-7: Know what an audit
report is and understand the 11 21,22,23 27,28
nature of an unqualified report.
LO 1-8: Understand how
technology and audit data
analytics are changing audits in
exciting ways.
LO 1-9: Understand why auditing
demands logic, reasoning, and 12 30
resourcefulness.
NOTE: References to auditing standards in the instructor manual follow a similar convention to that followed in
the text: AICPA standards will be referenced by clarified AU section and PCAOB standards will be referenced by
Auditing Standard (AS) number.
When students enter the first introductory class, they seldom understand what assurance or
auditing entails. Generally, they will not have read Chapter 1 before class, so it‘s important to
spend the time necessary during the first class to capture students‘ attention and stimulate their
interest in auditing.
After going over the class expectations, we spend the first part of class discussing and
illustrating the demand for auditing and the role of auditing in society. If students are to be
interested and excited to dig in and learn this daunting new material, they need to be convinced
that it is important and useful. Thus, we also emphasize that the concepts underlying auditing are
useful in many contexts other than auditing, including consulting and management.
Later in the class, we might ask the students how they would audit the automobile revenues
(say $100 billion) of a large automobile manufacturer. We tell them that each car and truck has
an invoice on the window and in the company's computer system, and that 8 million cars and
trucks were sold. We then ask them how many invoices out of 8 million they want to examine in
order to verify the $100 billion of revenues in the financial statements. Of course, you will get
some outlandish answers (e.g., 400,000 invoices). We eventually tell them that you may not look
at any invoices and that you may rely solely on the company‘s internal controls in conjunction
with a careful ratio analysis or other type of analytical procedure. This type of example quickly
gets the students' attention that auditing involves a substantial amount of judgment and common
sense.
[LO 1-1] Tips for Learning Auditing
We spend a few minutes on this section emphasizing the differences between the study of
accounting (which they are very familiar with) and the study of auditing (which they are not).
We try to make sure they understand what auditing focuses on and how it is much more
conceptual than their other accounting courses. We introduce the idea of a ―tool kit‖ and how it
relates to what we will be covering during the course.
[LO 1-2] The Demand for Auditing and Assurance
We spend a reasonable amount of time during the first lecture discussing why there is a
demand for auditing and assurance services. Many students think that the demand for auditing is
driven by the requirements of the Securities laws. It is important that the students have some
basic understanding of the agency relationship that leads to the demand for auditing. Figure 1-1
provides a good framework for this discussion. We then bring in how the CPA fits this need with
the qualities of independence, integrity, and objectivity. Sometimes we do role-plays, asking
students to come to the front of the room. One is selling a car, while the other is interested in
buying it. We let them discuss their concerns, what information they want, what the incentives of
the two parties are, what information asymmetries might exist, etc. We then tie this scenario,
which most students are somewhat familiar with or at least can relate to, back to the idea of the
demand for auditing.
, An Assurance Analogy: The Case of the House Inspector
Sometimes it is difficult for students to grasp the theoretical perspective of the role
accounting and auditing play in the principal-agent relationship, so we use a practical analogy to
aid their understanding. We go over how a house inspection is similar to a financial statement
audit including who the players are and how their roles relate to what we just discussed. We ask
the students what is similar and different between the house inspection and the financial
statement audit beginning with Table 1-1. Lastly, we ask the students for other examples of
assurance services and again try to relate the specifics of each to the characteristics listed in
Table 1-1.
Use Table 1-1
We then introduce the concept of ―management assertions‖ by asking the students what
specific assertions the company is making about specific financial statement items (for example:
cash or inventory). They usually can come up with the most obvious ones: existence, fairly and
accurately recorded, and all items are included. They might need to be pushed for some of the
others. They may also fail to distinguish between assertions in terms of account balances and
assertions in terms of transactions. It is useful to help them understand the differences between
assertions for transactions and balances but also how they are related. Then we ask them how, as
an auditor, you might go about collecting evidence on the cash account, bringing in what
assertions are most important and why. We like to emphasize the differences between assertions
about the account balance at the end of the period and the transactions posted to the account
during the period, relating these concepts to each other and to the idea of risk from an audit
perspective.
Use Table 1-2
Next, we talk about what else the prospective investor would want to know besides the
quality of management‘s assertions. Finally, we relate all of this back to Table 1-1. Problem 24
could be covered here.
[LO 1-4] Fundamental Concepts in Conducting a Financial Statement Audit
In this section, we discuss examples of the fundamental concepts in a financial statement
audit: materiality, audit risk, and evidence. Our philosophy is that it is much better for students to
grasp the fundamental principles and concepts of auditing early on, rather than immerse them in
the details of reporting, ethics, or legal liability too soon. We use Figure 1-2 to present a simple
overview of the audit process and then introduce the three fundamental concepts and the
conceptual and procedural details that a financial statement audit is built on: materiality, audit
risk, and evidence relating to management assertions.
Use Figure 1-2
This is an extremely important section as much of the rest of the course is built around these
three concepts. It is imperative for the students to begin to understand that the auditor‘s judgment
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller ASolution. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.99. You're not tied to anything after your purchase.
