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Test Bank for Auditing: A Practical Approach, 4th Canadian Edition by Robyn Moroney

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Test Bank for Auditing: A Practical Approach, 4th Canadian Edition 4ce by Robyn Moroney, Fiona Campbell, Jane Hamilton, Valerie Warren. ISBN-13: 9480 Full Chapters test bank included 1 Introduction and Overview of Audit and Assurance 1-1 1.1 Auditing and Assurance Defined 1-4 1.2 Demand...

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  • July 19, 2023
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  • 2022/2023
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CHAPTER 1
INTRODUCTION AND OVERVIEW OF AUDIT AND
ASSURANCE
CHAPTER LEARNING OBJECTIVES

1. Define an assurance engagement.
An assurance engagement involves an assurance provider arriving at an opinion about
some information being provided by their client to a third party. A financial statement audit is
one type of assurance engagement. This engagement involves an auditor arriving at an
opinion about the fair presentation of the financial statements. The audit report is addressed
to the shareholders of the company being audited, but other users may read the financial
statements. Learning about auditing and assurance requires an understanding of auditing
and assurance terminology, including terms such as audit risk, materiality, internal controls,
listed entity, and assertions.


2. Explain why there is a demand for audit and assurance services.
Financial statement users include investors (shareholders), suppliers, customers, lenders,
employees, governments, and the general public. These groups of users demand audited
financial statements because of their remoteness from the entity, accounting complexity,
their incentives competing with those of the entity’s managers, and their need for reliable
information on which to base decisions. The theories used to describe the demand for audit
and assurance services are agency theory, the information hypothesis, and the insurance
hypothesis.


3. Differentiate between types of assurance services.
Assurance services include financial statement audits, compliance audits, performance
audits, comprehensive audits, internal audits, and assurance on corporate social
responsibility (CSR) disclosures.


4. Explain the different levels of assurance.
The different levels of assurance include reasonable assurance, which is the highest level of
assurance, limited assurance, and no assurance. Reasonable assurance is provided on an
audit of a company’s financial statements. Limited assurance is provided in a review of a
company’s financial statements. No assurance is provided in a compilation engagement.


5. Outline different audit opinions
An auditor can issue an unmodified opinion, also known as a clean report, or an unmodified
opinion with an emphasis of matter paragraph. Alternatively, a modified opinion may be
issued as a qualified, an adverse, or a disclaimer of opinion.


6. Differentiate between the roles of the preparer and the auditor, and discuss the
different firms that provide assurance services.
It is the responsibility of a company’s governing body to ensure that its financial statements
are relevant, reliable, comparable, understandable, and true and fair. It is the responsibility
of the auditor to form an opinion on the fair presentation of the financial statements. In doing,

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