• Text Problem 1-20
• Text Problem 1-21
• Text Problem 2-18
• Text Problem 2-21

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.

1. Federal income tax returns of a corporation to determine whether the tax laws have been followed.

1. The computer operations of a large corporation to evaluate whether the internal controls are likely to prevent misstatements in accounting and operating data.

1. Financial statements for use by stockholders when there is an internal audit staff.

1. A bond indenture agreement to make sure a company is following all requirements of the contract.

1. Internal controls at a casino to ensure the casino is in compliance with federal and state regulations.

1. Computer operations of a corporation to evaluate whether the computer center is being operated as efficiently as possible.

1. Annual statements for the use of management.

1. Operations of the IRS to determine whether the internal revenue agents are using their time efficiently in conducting audits.

1. Statements for bankers and other creditors when the client is too small to have an audit staff.

1. Financial statements of a branch of the federal government to make sure that the statements present fairly the actual disbursements made during a period of time.

1. Disbursements of a branch of the federal government for a special research project to determine whether the expenditures were consistent with legislative bill that authorized the project.

1-21

Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium size3d local CPA firm located outside of Chicago. Over lunch he is surprised when his friend James Foley asked him, doesnt it bother you that your clients dont look forward to seeing their auditors each year/ Dave responds well auditing is only one of several services we produce. Most of our work for clients does not involve financial statement audits and out audit clients seem to like interacting with us.

1. Identify ways in which a financial statement audit adds value for clients.
2. List other services other than audits that Cznarnecki and Hogan likely provides.
3. Assume Cznarecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that you believe the firm should provide and explain why you believe this represents a growth opportunity for CPA firms.

2-18

International business class about how globalization is impacting the auditing profession. In preparation you met with your auditing professor and discussed these questions

1. What organizations are responsible for establishing us auditing standards used by CPA firms when auditing financial statements prepared by organizations based in the us?
2. What organization is responsible for establishing auditing standards internationally?
3. To what extent are AICPA auditing standards and international auditing standards similar?
4. What is the process the AICPA auditing standard board uses to develop AICPA auditing standards?
5. To what extent are PCAOB auditing standards impacted by international standards?
6. What auditing standards should an audit firm follow when they audit a client located in a foreign country that is listed on both a foreign stock exchange and a us stock exchange?

2-21

International standards on auditing are issued by the international auditing and assurance standard board. Use the IAASB web site to learn more about the IAASB and its standard- setting activities.

1. What is the objective of the IAASB who uses international standards on auditing?
2. Summarize the due process followed by the IAASB in setting standards.
3. How is the IAASB committed to transparency in the standard setting process?