Auditing and Assurance services an integrated approach 14th Edition Alvin a. arens, Randal j. elder, Mark s. Beasley - Solutions

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What is meant by the term level of assurance? How does the level of assurance differ for an audit of historical financial statements, a review, and a compilation?
What is negative assurance? Why is it used in a review engagement report?
Distinguish between compilation and review of financial statements. What is the level of assurance for each?
Distinguish the three forms of compilation reports that a CPA can provide to clients.
List five things that are required of an auditor by SSARS for a compilation.
What steps should auditors take if during a compilation engagement they become aware that the financial statements are misleading?
What procedures should the auditor use to obtain the information necessary to give the level of assurance required of reviews of financial statements?
What should auditors do if during a review of financial statements they discover that applicable accounting standards are not being followed?
What are the differences between the review reports for a private company under SSARS and for the interim financial statements of a public company?
Explain why a review of interim financial statements for a public company may provide a greater level of assurance than an SSARS review.
Define what is meant by attestation standards. Distinguish between attestation standards and auditing standards.
List the five Trust Services principles and explain whether a WebTrust licensed CPA can report on an entity's compliance with those principles individually or in combination.
Describe the purpose of a SysTrust assurance services engagement.
An audit client has engaged a third party service organization to host its payroll software package on servers located at the service organization. What options do you have to obtain assurance about the controls embedded in the payroll application?
Explain what is meant by prospective financial statements and distinguish between forecasts and projections. What four things are involved in an examination of prospective financial statements?
State the reporting requirements for statements prepared on a basis other than GAAP.
The Absco Corporation has requested that Herb Germany, CPA, provide a report to the Northern State Bank as to the existence or nonexistence of certain loan conditions. The conditions to be reported on are the working capital ratio, dividends paid on preferred stock, aging of accounts receivable,
Multiple Choice QuestionsThe following are miscellaneous questions about compilation and review services. Choose the best response.a. It is acceptable for a CPA to be associated with financial statements when not independent with respect to the client and still issue a substantially unmodified
Multiple Choice QuestionsThe following questions concern attestation engagements.Choose the best response.a. Which of the following professional services is considered an attestation engagement? (1) A management consulting engagement to provide IT advice to a client.(2) An income tax engagement to
Multiple Choice QuestionsThe following questions concern reports issued by auditors, other than those on historical financial statements. Choose the best response.a. An auditor is reporting on cash basis financial statements. These statements are best referred to in the opinion of the auditor by
Evaluate the following comments about compiled financial statements: "When CPAs associate their name with compiled financial statements, their only responsibility is to the client and that is limited to the proper summarization and presentation on the financial statements of information provided
You are doing a review services and related tax work engagement for Murphy Construction Company. You have made extensive inquiries of management about their financial statements and have concluded that management has an excellent understanding of its business and is honest, but lacking in
SSARS contain several procedures that are required when engaged to perform a compilation or review engagement. Below are ten statements that may or may not be relevant to a compilation or review engagement. For each of the ten statements, indicate whether the procedure is to be performed in a
In an engagement to review the financial statements of a nonpublic company, SSARS require the accountant to obtain review evidence that is primarily based on inquiries and analytical procedures. The nature of the accountant's inquiries is a matter of judgment. For example, the accountant may
Lucia Johnson, of Johnson and Lecy, CPAs, has completed the first-year audit of Tidwell Publishing Co., a publicly held company, for the year ended December 31, 2011. She is now working on a review of interim financial statements for the quarter ended March 31, 2012. Johnson has never done an
Each of the following represents different client requests for engagements related to WebTrust and SysTrust assurance services.a. Ware Hospital Systems, Inc. is in the process of developing a new patient records system. Management has approached a licensed SysTrust accountant to perform a SysTrust
Carl Monson, the owner of Major Products Manufacturing Company, a small, successful, longtime audit client of your firm, has requested you to work with his company in preparing 3-year forecasted information for the year ending December 31, 2012, and two subsequent years. Monson informs you that he
You have been requested by the management of J. L. Lockwood Co. to issue a debt compliance letter as a part of the audit of Taylor Fruit Farms, Inc. J. L.Lockwood Co. is a supplier of irrigation equipment. Much of the equipment, including that supplied to Taylor, is sold on a secured contract
Bengston, CPA, is conducting the audit of Pollution Control Devices, Inc. In addition, a supplemental negative assurance report is required to a major mortgage holder. The supplemental report concerns indenture agreements to keep the client from defaulting on the mortgage. Total assets are $14
Jones, CPA, has completed the audit of Sarack Lumber Supply Co. and has issued a standard unqualified report. In addition to a report on the overall financial statements, the company needs a special audited report on three specific accounts: sales, net fixed assets, and inventory valued at FIFO.
The Accounting and Review Services Committee (ARSC) is responsible for issuing standards for compilations and reviews of financial statement issued by nonpublic companies. Visit the AICPA website (www.aicpa.org) and answer the following questions about the operations of this committee:Requireda.
Explain the role of internal auditors for financial auditing. How is it similar to and different from the role of external auditors?
What is the nature of the two categories of standards in the IIA International Standards for the Professional Practice of Auditing?
Explain the difference between the independence of internal auditors and external auditors in the audit of historical financial statements. How can internal auditors best achieve independence?
Explain how governmental financial auditing is similar to and different from audits of commercial companies. Who does governmental auditing?
Explain what is meant by the Single Audit Act. What is its purpose?
In what ways is the Yellow Book consistent with generally accepted auditing standards, and what are some additions and modifications?
Identify the primary specific objectives that must be incorporated into the design of audit tests under the Single Audit Act.
Identify the key required reports of the Single Audit Act and OMB Circular A-133.
Describe what is meant by an operational audit.
Identify the three major differences between financial and operational auditing.
Distinguish between efficiency and effectiveness in operational audits. State one example of an operational audit explaining efficiency and another explaining effectiveness.
Distinguish among the following types of operational audits: functional, organizational, and special assignment. State an example of each for a not-for-profit hospital.
Explain why many people think of internal auditors as the primary group responsible for conducting operational audits.
Explain the role of government auditors in operational auditing. How is this similar to and different from the role of internal auditors?
Under what circumstances are external auditors likely to be involved in operational auditing? Give one example of operational auditing by a CPA firm.
Explain what is meant by the criteria for evaluating efficiency and effectiveness. Provide five possible specific criteria for evaluating effectiveness of an IT system for payroll.
Identify the three phases of an operational audit.
Explain how planning for operational auditing is similar to and different from financial auditing.
What are the major differences between reporting for operational and financial auditing?
Multiple Choice QuestionsThe following questions deal with independence of auditors. Choose the best response.a. The operational auditor's independence is most likely to be compromised when the internal audit department is responsible directly to the (1) Vice president of finance. (2) President.
Multiple Choice QuestionsThe following questions deal with governmental auditing. Choose the best response.a. A governmental audit may extend beyond an examination leading to the expression of an opinion on the fairness of financial statement presentation to includeb. When engaged to audit a
Multiple Choice QuestionsThe following questions deal with operational auditing.Choose the best response.a. Which of the following best describes the operational audit? (1) It requires constant review by internal auditors of the administrative controls as they relate to the operations of the
Multiple Choice QuestionsThe following questions deal with internal auditing. Choose the best response.a. Which of the following is generally considered to be a major reason for establishing an internal auditing function? (1) To relieve overburdened management of the responsibility for establishing
Lajod Company has an internal audit department consisting of a manager and three staff auditors. The manager of internal audits, in turn, reports to the corporate controller. Copies of audit reports are routinely sent to the audit committee of the board of directors as well as to the corporate
Weston Corporation has an internal audit department operating out of the corporate headquarters. Various types of audit assignments are performed by the department for the eight divisions of the company. The following findings resulted from recent audits of Weston Corporation's White Division:1.
Haskin Company was founded 40 years ago and now has several manufacturing plants in the Northeast and Midwest. The evaluation of proposed capital expenditures became increasingly difficult for management as the company became geographically dispersed and diversified its product line. Thus, the
Lecimore Company has a centralized purchasing department that is managed by Joan Jones. Jones has established policies and procedures to guide the clerical staff and purchasing agents in the day-to-day operation of the department. She is satisfied that these policies and procedures are in
Superior Co. manufactures automobile parts for sale to the major U.S. automakers. Superior's internal audit staff is to review the internal controls over machinery and equipment and make recommendations for improvements when appropriate. The internal auditors obtained the following information
The Institute of Internal Auditors (IIA) is an international professional association of more than 170,000 members with global headquarters in Altamonte Springs, Florida. Throughout the world, The IIA is recognized as the internal audit profession's leader in certification, education, research, and
Explain the relationships among audit services, attestation services, and assurance services, and give examples of each.
Discuss the major factors in today's society that have made the need for independent audits much greater than it was 50 years ago.
Distinguish among the following three risks: risk-free interest rate, business risk, and information risk. Which one or ones does the auditor reduce by per-forming an audit?
Identify the major causes of information risk and identify the three main ways information risk can be reduced. What are the advantages and disadvantages of each?
Explain what is meant by determining the degree of correspondence between information and established criteria. What are the information and established criteria for the audit of Jones Company's tax return by an internal revenue agent? What are they for the audit of Jones Company's financial
Describe the nature of the evidence the internal revenue agent will use in the audit of Jones Company's tax return.
In the conduct of audits of financial statements, it would be a serious breach of responsibility if the auditor did not thoroughly understand accounting.However, many competent accountants do not have an understanding of the auditing process. What causes this difference?
What are the differences and similarities in audits of financial statements, compliance audits, and operational audits?
List five examples of specific operational audits that can be conducted by an internal auditor in a manufacturing company.
What knowledge does the auditor need about the client's business in an audit of historical financial statements? Explain how this knowledge may be useful in performing other assurance or consulting services for the client.
What are the major differences in the scope of the audit responsibilities for CPAs, GAO auditors, IRS agents, and internal auditors?
Identify the four parts of the Uniform CPA Examination.
Explain why CPAs need to be knowledgeable about information technology, including e-commerce technologies.
Multiple Choice QuestionsThe following questions deal with audits by CPA firms. Choose the best response.a. Which of the following best describes why an independent auditor is asked to express an opinion on the fair presentation of financial statements? (1) It is difficult to prepare financial
Multiple Choice QuestionsThe following questions deal with types of audits and auditors. Choose the best response.a. Operational audits generally have been conducted by internal auditors and governmental audit agencies but may be performed by certified public accountants. A primary purpose of an
The list below indicates various audit, attestation, and assurance engagements involving auditors.1. A report on the effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.2. An auditor's report on whether the financial statements are fairly
Busch Corporation has an existing loan in the amount of $4.5 million with an annual interest rate of 5.5%. The company provides an internal company-prepared financial statement to the bank under the loan agreement. Two competing banks have offered to replace Busch Corporation's existing loan
Consumers Union is a nonprofit organization that provides information and counsel on consumer goods and services. A major part of its function is the testing of different brands of consumer products that are purchased on the open market and then the reporting of the results of the tests in Consumer
James Burrow is the loan officer for the National Bank of Dallas. National has a loan of $325,000 outstanding to Regional Delivery Service, a company specializing in delivering products of all types on behalf of smaller companies. National's collateral on the loan consists of 25 small delivery
Five college seniors with majors in accounting are discussing alternative career plans. The first senior plans to become an internal revenue agent because his primary interest is income taxes. He believes the background in tax auditing will provide him with better exposure to income taxes than will
In the normal course of performing their responsibilities, auditors often conduct audits or reviews of the following:1. Federal income tax returns of an officer of the corporation to determine whether he or she has included all taxable income in his or her return.2. Disbursements of a branch of the
Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend James Foley asks him, "Doesn't it bother you that your clients don't look forward to seeing their auditors each year? Dave responded,
Individuals are licensed as CPAs by individual states. Information on the requirements for each state can be found on the National Association of State Boards of Accountancy (NASBA) web site (www.nasba.org). The Uniform CPA Examination is administered by the American Institute of Certified Public
State the four major types of services CPAs perform, and explain each.
What major characteristics of the organization and conduct of CPA firms permit them to fulfill their social function competently and independently?
What is the role of the Public Company Accounting Oversight Board?
Describe the role of the SEC in society and discuss its relationship with and influence on the practice of auditing.
What roles are played by the American Institute of Certified Public Accountants for its members?
What are the purposes of the AICPA Statements on Standards for Attestation Engagements?
Who is responsible for establishing auditing standards for audits of U.S. public companies? Who is responsible for establishing auditing standards for U.S. private companies? Explain.
Distinguish between generally accepted auditing standards and generally accepted accounting principles, and give two examples of each.
The first standard of field work requires the performance of the audit by a person or persons having adequate technical training and proficiency as an auditor.What are the various ways in which auditors can fulfill the requirement of the standard?
Generally accepted auditing standards have been criticized by different sources for failing to provide useful guidelines for conducting an audit. The critics believe the standards should be more specific to enable practitioners to improve the quality of their performance. As the standards are now
Describe the role of International Standards on Auditing. What is the relationship between International Standards on Auditing and U.S. Generally Accepted Auditing Standards?
What is meant by the term quality control as it relates to a CPA firm?
The following is an example of a CPA firm's quality control procedure requirement: "Any person being considered for employment by the firm must have completed a basic auditing course and have been interviewed and approved by an audit partner of the firm before he or she can be hired for the audit
State what is meant by the term peer review. What are the implications of peer review for the profession?
What are the two AICPA resource centers to which CPA firms may belong? What are the primary purposes of the two centers?
Multiple Choice QuestionsThe following questions deal with auditing standards. Choose the best response.a. International Standards on Auditing are established by the (1) International Accounting Standards Board.(2) International Auditing and Assurance Standards Board.(3) Auditing Standards
Multiple Choice QuestionsThe following questions concern quality control standards. Choose the best response.a. A CPA firm is reasonably assured of meeting its responsibility to provide services that conform with professional standards by(1) Adhering to generally accepted auditing standards.(2)

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Auditing and Assurance services an integrated approach 14th Edition Alvin a. arens, Randal j. elder, Mark s. Beasley - Solutions

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