Exam (elaborations)
Solutions manual for auditing and assurance services 9th edition louwers full chapter
- Course
- Institution
Solutions manual for auditing and assurance services 9th edition louwers full chapter
[Show more]
1 review
By: TESTBANKSWIZZARD • 22 hours ago
Content preview
,ACCESS Test Bank for Auditing & Assurance Services 9th Edition Louwersh h h h h h h h h h
Chapterh01h-hAuditinghandhAssurancehServices
CHAPTERh01
AuditinghandhAssurancehServices
LEARNINGhOBJECTIVES
ReviewhC Multipleh Exercises,hProblems,h
heckpoints Choice andhSimulations
1.hDefinehinformationhriskhandhexplainhhowhthehfi
nancialhstatementhauditinghprocesshhelpshtohr
1,h2,h3 29,h31,h38 65*
educehthishrisk,htherebyhreducinghthehcosthofh
capitalhforhahcompany.
2.
4,h5,h6,h7,h8 23,h25,h28,h44,h50 60,h65*
Definehandhcontrasthassurance,hattestation,h
andhfinancialhstatementhauditinghservices.
3.
36,h39,h40,h41,h45,
Describehandhdefinehthehassertionshthathma
46,h47,h48,h49,h52,
nagementhmakeshabouththehrecognition,hmeasu 9,h10,h11 62,h63,h67,h68,h69
53,h54,h55,h57,h58,
rement,hpresentation,handhdisclosurehofhthehfin
59
ancialhstatementshandhexplainhwhyhauditorshus
ehthemhashahfocalhpointhofhthehaudit.
4.
Definehprofessionalhskepticismhandhexplai 12 24,h37 61
nhitshkeyhcharacteristics.
5.
Describehthehorganizationhofhpublichaccount 13,h14 30,h42,h56 72
inghfirmshandhidentifyhthehvarioushserviceshthath
theyhoffer.
6.
Describehthehauditshandhauditorshinh 15,h16,h17,h18 26,h27,h32,h34,h35 64,h66
governmental,hinternal,handhoperationalh
auditing.
7.
Listhandhexplainhthehrequirementshforhbeco
19,h20,h21,h22 33,h43,h51 70,h71
minghahcertifiedhpublichaccountanth(CPA)handh
otherhcertificationshavailablehtohanhaccounting
hprofessional.
(*)hItemhrelateshtohmultiplehlearninghobjectives
1-1
Copyrighth©2024hMcGraw-
HillhEducation.hAllhrightshreserved.hNohreproductionhorhdistributionhwithouththehpriorhwrittenhconsenthofhMc
Graw-HillhEducation.
mynursytest.store
,ACCESS Test Bank for Auditing & Assurance Services 9th Edition Louwers
h h h h h h h h h h
Chapterh01h-hAuditinghandhAssurancehServices
SOLUTIONShFORhREVIEWhCHECKPOINTS
1.1 Businesshriskhishthehriskhthathanhentityhwillhfailhtohmeethitshbusinesshobjectives.hWhenhassessinghbusinesshrisk,h
ahprofessionalhmusthconsiderhallhpossiblehthreatshtohanhentity’shgoalshandhobjectives.hSomehillustrativehexamp
leshincludehthehriskhthat:h1)hitshexistinghcustomershwillhstarthbuyinghproductshorhserviceshfromhitshprimaryhco
mpetitors;h2)hitshproducthlineshwillhbecomehobsolete;h3)hitshtaxeshwillhincrease;h4)hkeyhgovernmenthcontractsh
willhbehlost;h5)hkeyhemployeeshwillhleavehthehentity;handhmanyhotherhexampleshexist.
1.2 Tohhelphminimizehbusinesshriskhandhtakehadvantagehofhotherhopportunitieshpresentedhinhtoday’shcompetitiveh
businesshenvironment,hdecisionhmakershsuchhashchiefhexecutivehofficersh(CEOs)hdemandhtimely,hrelevant,ha
ndhreliablehinformation.hThereharehathleasthfourhenvironmentalhconditionshthathincreasehdemandhforhreliablehi
nformation.hFirst,hcomplexityhwhichhimplieshthatheventshandhtransactionshinhtoday’shglobalhbusinesshenviron
menthcanhbehcomplicated.hMosthinvestorshdohnothhavehthehlevelhofhexpertisehneededhtohproperlyhaccounthforh
complexhtransactions.hSecondhishremotenesshwhichhimplieshthathdecisionhmakersharehoftenhseparatedhfromhc
urrenthandhpotentialhbusinesshrelationshipshduehtohdistancehandhtime.hForhexample,hinvestorshmayhnothbehableh
tohvisithdistanthlocationshtohcheckhuphonhtheirhinvestments.hThirdhishtime-sensitivityhwhich
implieshthathinhtoday’sheconomichenvironment,hinvestorshandhotherhusershofhfinancialhstatementshneedhtoh
makehdecisionshmorehrapidlyhthanheverhbefore.hAshahresult,hthehabilityhtohpromptlyhobtainhhigh-
qualityhinformationhishessential.hFourthhishahconsequencehwhichhimplieshthathdecisionshmayhveryhwellhin
volvehsignificanthinvestments.hAshahresult,hthehconsequenceshcanhbehseverehifhinformationhcannothbehobt
ained
1.3 Ofhallhthehdifferenthriskshdiscussedhinhthehchapterhuphtohthishpoint,hinformationhriskhishthehonehthathishmosthlik
elyhtohcreatehthehdemandhforhindependenthandhobjectivehassurancehserviceshishinformationhriskhorhthehprobab
ilityhthaththehinformationhcirculatedhbyhanhentityhwillhbehfalsehorhmisleading.hBecausehthehprimaryhsourcehofh
informationhforhinvestorshandhcreditorshishthehcompanyhitself,hanhincentivehexistshforhthathcompany’shmanag
ementhtohmakehtheirhbusinesshorhservicehappearhtohbehbetterhthanhithactuallyhmayhbe,htohpuththeirhbesthfoothfor
ward.hAshahresult,hpreparershandhissuershofhfinancialhinformationh(directors,hmanagers,haccountants,handhoth
erhpeoplehemployedhinhahbusiness)hmighthbenefithbyhgivinghfalse,hmisleading,horhoverlyhoptimistichinformati
on.hThishpotentialhconflicthofhinteresthbetweenhinformationhprovidershandhusershwhichhprovideshthehunderlyi
nghbasishforhthehdemandhforhreliablehinformation.
1.4 Thehfourhmajorhelementshofhthehbroadhdefinitionhofhassurancehserviceshare
Independence.hCPAshwanthtohpreservehtheirhreputationhandhcompetitivehadvantagehbyhalwayshpreservingh
integrityhandhobjectivityhwhenhperforminghassurancehservices.
Professionalhservices.hVirtuallyhallhworkhperformedhbyhCPAshishdefinedhash“professionalhservices”hashlongh
ashithinvolveshsomehelementhofhjudgmenthbasedhonheducationhandhexperience.
Improvinghthehqualityhofhinformationhorhitshcontext.hThehemphasishishonh“information,”hCPAs’htraditionalha
reahofhexpertise.hCPAshcanhenhancehqualityhbyhassuringhusershabouththehreliabilityhandhrelevancehofhinform
ation,handhthesehtwohfeaturesharehcloselyhrelatedhtohthehfamiliarhcredibility-lendinghproductshof
attestationhandhaudithservices.h“Context”hishrelevancehinhahdifferenthlight.hForhassurancehservices,himprovingh
thehcontexthofhinformationhrefershtohimprovinghitshusefulnesshwhenhtargetedhtohparticularhdecisionhmakershinh
thehsurroundingshofhparticularhdecisionhproblems.
Forhdecisionhmakers.hAshtheh“consumers”hofhassurancehservices,hdecisionhmakersharehthehbeneficiarieshofhtheh
assurancehservices.hDecisionhmakershmayhorhmayhnothbehtheh“client”hthathpayshthehfeehandhmayhorhmayhnothb
ehonehofhthehpartieshtohanhassertionhorhotherhinformation,hbuththeyhpersonifyhthehconsumerhfocushofhnewhandhd
ifferenthprofessionalhwork.
1.5 Anhassurancehserviceshengagementhishanyhassignmenththathimproveshthehqualityhofhinformation,horhitshconte
xt,hforhdecisionhmakers.hBecausehinformationh(e.g.,hfinancialhstatements)harehpreparedhbyhmanagershofhanhen
tityhwhohhavehauthorityhandhresponsibilityhforhfinancialhsuccesshorhfailure,hanhoutsiderhmayhbehskepticalhthatht
hehinformationhtrulyhishobjective,hfreehfromhbias,hfullyhinformative,handhfreehfromhmaterialherror,
1-2
Copyrighth©2024hMcGraw-
HillhEducation.hAllhrightshreserved.hNohreproductionhorhdistributionhwithouththehpriorhwrittenhconsenthofhMc
Graw-HillhEducation.
mynursytest.store
, ACCESS Test Bank for Auditing & Assurance Services 9th Edition Louwers
h h h h h h h h h h
Chapterh01h-hAuditinghandhAssurancehServices
intentionalhorhinadvertent.hThehserviceshofhanhindependenthauditorhhelpshresolvehthosehdoubtshbecausehthehau
ditor’shsuccesshdependshuponhhishorhherhindependent,hobjective,handhcompetenthassessmenthofhthehinformatio
nh(e.g.,hthehconformityhofhthehfinancialhstatementshwithhthehappropriatehreportinghframework).hThehindepende
nthauditor’shrolehishtohlendhcredibilityhtohthehinformation;hhence,hthehoutsiderhwillhlikelyhseekhhishorhherhindepe
ndenthopinionhabouththehfinancialhstatements.
1.6 Anhattestationhengagementhish“anhengagementhinhwhichhahpractitionerhishengagedhtohissuehorhdoeshissuehah
writtenhcommunicationhthathexpresseshahconclusionhabouththehreliabilityhofhahwrittenhassertionhthathishthehre
sponsibilityhofhanotherhparty”h(SSAEh10,hATh101.01).hTohattesthmeanshtohlendhcredibilityhorhtohvouchhforhth
ehtruthhorhaccuracyhofhthehstatementshthathonehpartyhmakeshtohanother.hThehattesthfunctionhishahtermhoftenhap
pliedhtohthehactivitieshofhindependenthCPAshwhenhactinghashauditorshofhfinancialhstatements.
1.7 Anhassurancehservicehengagementhishonehthathimproveshthehqualityhofhinformation,horhitshcontext,hforhdecisio
nhmakers.hThus,hanhattestationhservicehengagementhishonehtypehofhanhassurancehservice.hAnotherhwayhofhthin
kinghabouththehissuehishtohrememberhthaththehfinancialhstatementhaudithengagementhishonehtypehofhanhattestat
ionhservice.hPleasehseehexhibith1.3hinhthehtexthwhichhdepictshthehrelationshiphamonghassurance,hattestation,ha
ndhauditinghengagements.
1.8 AccordinghtohthehAmericanhAccountinghAssociation,h“Auditinghishahsystematichprocesshofhobjectivelyhobta
ininghandhevaluatinghevidencehregardinghassertionshaboutheconomichactionshandheventshtohascertainhthehdeg
reehofhcorrespondencehbetweenhthehassertionshandhestablishedhcriteriahandhcommunicatinghthehresultshto
interestedhusers.”hInheffect,hauditorshaddhreliabilityhtohthehinformationhthathishprovidedhtohinterestedhusers.hOfh
course,hthishdefinitionhishfocusedhonhanhexternalhreportinghcontext.hStudentshmayhalsohdiscusshhowhgovernm
entalhandhinternalhauditorshoperatehashwell.
Inhresponsehtoh“Whathdohauditorshdo?”hstudentshcanhrespondhbyhstatinghthathauditorsh(1)hobtainhandhevaluateh
evidencehabouthassertionshmadehbyhmanagementhaboutheconomichactionshandhevents,h(2)hascertainhthehdegre
ehofhcorrespondencehbetweenhthehassertionshandhthehappropriatehreportinghframework,handh(3)hissuehanhaudith
reporth(opinion).hStudentshcanhalsohrespondhmorehgenerallyhbyhstatinghthathauditorshessentiallyhlendhcredibil
ityhtohthehfinancialhstatementshpresentedhbyhmanagement.
1.9 Financialhaccountinghrefershtohthehprocesshofhrecording,hclassifying,hsummarizing,handhreportinghabouthahco
mpany’shassets,hliabilities,hcapital,hrevenues,handhexpenseshinhthehfinancialhstatementshinhaccordancehwithhth
ehapplicablehfinancialhreportinghframeworkh(e.g.,hGAAP).hInhsohdoing,hthehmanagementhteamhishmakinghsev
eralhassertionshabouththehfinancialhstatements.hThehfinancialhaccountinghprocesshishthehresponsibilityhofhtheh
managementhteam.
Financialhstatementhauditinghrefershtohthehprocesshwherebyhprofessionalhauditorshgatherhevidencehrelatedhtoh
thehassertionshthathmanagementhmakeshinhthehfinancialhstatements,hevaluateshthehevidencehandhconcludeshonh
thehfairnesshofhthehfinancialhstatementshinhahreport.
Theyhdifferhbecausehaccountantshproducehthehfinancialhstatementshinhaccordancehwithhthehapplicablehfinanci
alhreportinghframework.hAfterhthishishcomplete,hfinancialhstatementhauditorshthenhperformhprocedureshtohasce
rtainhwhetherhthehfinancialhstatementshhavehbeenhpreparedhinhaccordancehwithhthehapplicablehfinancialhreporti
nghframework.
1.10 ThehtwohmajorhclassificationshofhASBhassertionshwithhseveralhassertionshinheachhclassificationhare:h
AssertionshAbouthClasseshofhTransactionshandhEvents,handhRelatedhDisclosures
Occurrencehassertion:hThehobjectivehishtohestablishhwithhevidencehthathtransactionshgivinghrisehtohassets,hli
abilities,hsales,handhexpenseshoccurred.hKeyhquestionshincludeh“Didhthehrecordedhsaleshtransactionshreallyho
ccur?”
1-3
Copyrighth©2024hMcGraw-
HillhEducation.hAllhrightshreserved.hNohreproductionhorhdistributionhwithouththehpriorhwrittenhconsenthofhMc
Graw-HillhEducation.
mynursytest.store
The benefits of buying summaries with Stuvia:
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
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 leonardmuriithi061. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $17.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
52928 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now