100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Solutions for Auditing: The Art and Science of Assurance Engagements, 16th Canadian Edition by Arens CA$56.85   Add to cart
Quickly navigate to
Preview
  2.  
  3. Auditing
  4.  
  5. Auditing
  6.  
  7. Auditing

Exam (elaborations)

Solutions for Auditing: The Art and Science of Assurance Engagements, 16th Canadian Edition by Arens
 56 views  1 purchase

Solutions for Auditing: The Art and Science of Assurance Engagements, 16ce 16th Canadian Edition by Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan. Full Chapters Solutions areincluded (Chapter 1 to 20) The Demand for Audit and Other Assurance Services The Public Accounting Pro...

[Show more]

Preview 4 out of 466  pages

Document information

  • August 12, 2024
  • 466
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

Written for

All documents for this subject (143)

Seller

avatar-seller
StepsSol

Reviews received

Content preview

Solutions for Auditing: The Art and Science of Assurance Engagements, 16th Canadian
Edition by Arens

Complete Chapters
Chapter 1 Solutions included ✅

The Demand for Audit and Other Assurance
Services


Concept Checks

C1-1 Explain the difference between reasonable and limited assurance. Why do you think the
UPS’ Sustainability Report is limited assurance (consider the following elements of an assurance
engagement - subject matter, suitable criteria, and sufficient, appropriate evidence).

Reasonable assurance is a high, but not absolute, level of assurance. A limited assurance
engagement, is lower than in a reasonable assurance engagement, but a level of assurance that
still enhances the intended users' confidence about the subject matter being reported. The nature,
timing and extent of procedures performed in a limited assurance engagement is limited (mostly
inquiries and analytics) compared with that necessary in a reasonable assurance engagement. For
a limited assurance engagement, the practitioner provides negative conclusion (nothing has come
to our attention). In contrast, for a reasonable assurance engagement, the auditor provides a
positive opinion that the subject matter information is prepared, in all material respects, in
accordance with the applicable criteria

Most sustainability reports, like the UPS report, are currently provided on a voluntary basis and
are limited assurance. Sustainability reports cover a broad range of subject matter, some of the
disclosures are descriptive and potentially subjective and can therefore be more difficult to
obtain the type of evidence necessary for reasonable assurance. Since the reports are issued on a
voluntary basis, cost would be consideration as well.


C1-2 What are the major causes of information risk. How can information risk be reduced?

Information risk reflects the possibility that the information upon which the business risk decision
was made was inaccurate. The major causes of information risk are: remoteness of information,
biases and motives of the provider, voluminous data, and complex exchange transactions. Users
can reduce information risk by examining the information directly, sharing the risk with the
information preparer, or requesting some assurance over the information (either an audit or a
review engagement).

C1-3 Explain how and why the auditor makes information trustworthy and credible.

External users value the auditor’s assurance because of the auditor’s integrity, independence,
expertise, and knowledge of the subject matter. This makes the information credible and
trustworthy.




1-1

, Chapter 1: The Demand for Audit and Other Assurance Services


C1-4 Describe and explain the differences and similarities between financial statement,
compliance, performance and sustainability audits.

Differences—are based upon the information and criteria being audited: a financial statement
audit (e.g., historical financial statements) assesses that that the financial statements are prepared
in accordance with the applicable accounting framework based upon evidence with respect to
potential material misstatements; a compliance audit (e.g., compliance with environmental
legislation) assesses the organization’s ability to comply with legislation; a performance audit
(e.g., effective factory production or effectiveness of social assistance program) assesses the
efficiency, effectiveness and/or economy of processes, organizational units and/or government
programs; a sustainability audit assesses whether sustainability reports or parts of the reports are
prepared in accordance with the applicable sustainability framework.

Similarities—The auditor is acting with due care, meaning that he/she is following some type of
systematic process governed by auditing standards (financial statements: CPA Canada Handbook
(GAAS); compliance: CPA Canada Handbook or IIA standards, depending upon whether a public
accountant or the auditor general is conducting the audit; performance audits: could be CPA
Canada Handbook if it is the auditor general or a public accountant; IIA standards in the case of
internal auditors; and sustainability audit could be CPA Canada Assurance Standards (if a public
accountant is conducting the engagement or standards that developed by other organizations if the
practitioner is not a public accountant. The auditor is also independent and competent (although
the degree of independence will vary according to who is conducting the audit).

C1-5 Describe and explain the difference and similarities among the various types of auditors.

Auditor Types of Engagements and Employers Type of Training
Internal Auditor Tend to perform compliance, financial, Although there is no requirement
and performance audits (although can for a designation, internal auditors
include fraud audits). Work for large for- often have a CPA or a CIA
profit and not-for-profit organizations designation. Internal auditors
(e.g., hospitals, universities). receive extensive training on how
to conduct operational audits.
Government Auditor Performs performance audits and Government auditors generally
financial statement audits. Employed by have a CPA designation (if
provincial or federal government. employed by the auditor general),
although some have a CIA
designation.
CRA Auditor Performs compliance audits related to Many CRA auditors have a CPA
personal, corporate, and value-added designation (although not
taxes (GST/HST). Works for the Canada required).
Revenue Agency.




1-2

, Chapter 1: The Demand for Audit and Other Assurance Services



Auditor Types of Engagements and Employers Type of Training
Fraud and forensic Performs forensic and fraud audits. Many Many forensic accountants and
auditors forensic accountants and fraud auditors fraud auditors have a CPA
work for public accounting firms (or firms designation (although not
that specialize in forensic accounting required). Some have a CIA
services). Some also work in industry, designation or one of the fraud
government, and large not-for-profits (as specialist designations.
part of internal audit).
Sustainability Perform different types of sustainability Many sustainability auditors are
auditors audits from assurance over selected KPIs CPAs but the group can encompass
to assurance over an organization’s entire a wide range of professionals (such
sustainability report, including key data as engineers).
and text disclosures. Many work for
public accounting firms and some work
for other assurance providers such as
Bureau Veritas
Public Accountant The main engagements are related to Public accountants have a CPA
assurance of financial information for a designation as well as a public
wide range of enterprises and industries – accountant’s licence.
particularly financial statement audits.
However, can also perform compliance
and performance engagements.
Opportunity for experience in auditing,
tax consulting, and management
consulting practices.

C1-6 Read Auditing in Action 1-2. What kind of assurance engagement is described in the
vignette? What is the subject matter information and criteria of this engagement? What kind of
evidence would the auditors use?

The type of assurance engagement is a performance audit. Based upon reading the vignette, the
subject matter information are Correctional Services Canada’s policies, practices and practices
that assess offenders’ and support successful reintegration into society well as those related to
workforce diversity, equity and inclusion. The audit evidence would include interviews with
Correctional Service Canada officials, review of documents, and analysis of offender and human
resources data.


Review Questions

1-1 You will be looking at his accounting records (evidence) and evaluating and collecting
information about those records. Your evaluation process will be done using relatively standard
audit procedures (part of GAAS – generally accepted auditing standards). Your objective is to
compare the evidence (his accounting records) to the financial statements that he has prepared
(which will become information available to others, such as the Canada Revenue Agency). To help
you evaluate his records (the evidence) you will use criteria (likely ASPE – Accounting Standards



1-3

, Chapter 1: The Demand for Audit and Other Assurance Services


for Private Enterprises). You are able to add value to the financial statements because you are an
independent professional, qualified accountant.

1-2 This apparent paradox arises from the distinction between the function of auditing and the
function of accounting. The accounting function is the recording, classifying, and summarizing of
economic events to provide relevant information to decision makers. The rules of accounting are
the criteria used by the auditor for evaluating the presentation of economic events for financial
statements and they must therefore have an understanding of accounting standards, as well as
auditing standards. The accountant need not, and frequently does not, understand what auditors do
(in order to be a competent accountant auditing knowledge is not needed), unless they are involved
in doing audits, or has been trained as an auditor.

1-3 Auditor independence is fundamental to the conduct of the audit and the auditor’s role in
protecting the public interest. In the case of the financial statement audit, when independence is
impaired, the credibility of the financial statements, the auditor, and the auditor’s report becomes
questionable.

This famous quote from Chief Justice Warren Burger, of the U.S. Supreme Court, highlights the
auditors’ responsibility:

The independent auditor assumes a public responsibility transcending any employment
relationship with the client. The independent public accountant performing this special
function owes ultimate allegiance to the company’s creditors and stockholders, as well as to
[the] investing public. This ‘public watchdog’ function demands that the accountant maintain
total independence from the client at all times and requires complete fidelity to the public
trust.

1-4 Auditors’ lack independence can negatively influence professional skepticism in many
ways. If auditors are not independent, then they may not critically examine the evidence or
question management’s explanations when following up on unusual findings. For instance, if the
auditor has audited the company for several years and find management to be honest and
forthcoming, that past experience (which is referred to as a familiarity threat to independence) may
lead the auditors to readily accept answers without attempting to corroborate (confirm) the
explanations (in other words not perform a critical examination).

1-5 To do an audit, there must be information in a verifiable form and some standards (criteria)
by which the auditor can evaluate the information. Examples of established criteria include
International Financial Reporting Standards (IFRS) or Accounting Standards for Private
Enterprises (ASPE), and the Income Tax Act. Determining the degree of correspondence between
information and established criteria is determining whether a given set of information is in
accordance with the established criteria using audit procedures that conform with GAAS –
generally accepted auditing standards. The information for Glickle Ltd.’s tax return is the corporate
tax returns filed by the company. The criteria are the Income Tax Act and all interpretations. For
the audit of Glickle Ltd.’s financial statements, the information is the financial statements being
audited and the established criteria are ASPE or IFRS and generally accepted auditing standards.




1-4

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

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

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

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 StepsSol. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for CA$56.85. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

72042 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling

Recently viewed by you

Essay ·

(1)

1.5.1B Ontwikkeling als sociaal werker CIJFER 8.8
CA$56.85  1x  sold
  • (0)
  Add to cart