Solution Manual For Auditing & Assurance Services: A
Systematic Approach, 12th Edition By William Messier Jr,
Steven Glover, Verified Chapters 1 - 21, Complete Newest
Version
The fact that errors and/or omissions in certain relatively insignificant account
balances would not affect an auditor's decision when reporting on the financial
statements as a whole relates most closely to which major audit concept? -
ANSWER: Materiality
Audit evidence - ANSWER: Can be gathered from many sources and is not limited to
the underlying accounting data.
Audit risk - ANSWER: Is the risk that a "clean" opinion will be issued when, in reality,
the financial statements are materially misstated.
The examination of all of a client's transactions would make an audit very costly.
Thus, auditors rely heavily on sampling as a way to obtain evidence. Which of the
following would result in a smaller sample? - ANSWER: A decrease in the desired
level of assurance.
Which of the following audit phases would generally be conducted before all of the
others listed below? - ANSWER: Gaining an understanding of the client's industry.
An auditor's evaluation of the reasonableness of a client's loan loss reserve would
normally be made during which phase of the audit? - ANSWER: Auditing business
processes and related accounts
Gaining an understanding of the client and its environment includes all of the
following areas except - ANSWER: The audit fee and timeline for completion of the
work.
The most favorable type of audit report opinion for the client to receive is - ANSWER:
Unqualified.
The study and practice of auditing is unlike other areas in accounting because it -
ANSWER: Requires common sense and some creativity
The Public Company Accounting Oversight Board [PCAOB] derives its authority to set
and enforce auditing standards for public company audits from - ANSWER: An Act of
Congress
Which of the following is generally not considered one of the five business processes
or cycles? - ANSWER: Information technology
,The five business processes are - ANSWER: Financing, Purchasing, Human Resource
Management, Inventory Management, and Revenue process
Which of the following is NOT a typical responsibility for an associate and/or staff
level auditor? - ANSWER: Assisting in the development of the audit plan.
Prior to the Sarbanes-Oxley Act of 2002, the _________ was responsible for creating
all new auditing standards in the United States. Today, for publicly-held companies,
that responsibility rests with the _____________. - ANSWER: AICPA Auditing
Standards Board [ASB] prior to 2002; PCAOB today.
To exercise due professional care, an auditor should - ANSWER: Critically review the
work performed and judgment exercised by those assisting in the audit
What is the essential meaning of the generally accepted auditing standard that
requires that the auditor be independent? - ANSWER: The auditor must be without
bias with respect to the client under audit.
The principles underlying an audit conducted in accordance with GAAS as developed
by the ASB and the IAASB include all of the following except - ANSWER: The auditor
should plan and conduct the audit to obtain assurance that the financial statements
are free of any misstatement.
The responsibility for implementing sound accounting practices and principles,
maintaining an adequate internal control structure, and making fair representations
in the financial statements rests primarily with the - ANSWER: Senior management.
Which of the following is considered an example of a compliance audit? - ANSWER:
The examination of a company's adherence to government-mandated safety
provisions.
Which of the following best describes the relationship between management and
the board of directors? - ANSWER: Management reports to the board of directors.
Which of the following best describes the roles of the AICPA and the PCAOB in
establishing auditing standards? - ANSWER: All of them, 1 Auditing standards issued
by the AICPA and the PCAOB are considered minimum standards of performance. 2
AICPA sets auditing standards for use in non-public entities. 3 PCAOB sets auditing
standards for use in publicly held companies.
"Mid-tier" firms - ANSWER: Are national in their practices and have international
affiliates.
Which of the following organizations affect the environment that CPAs work in? -
ANSWER: All of the above which includes AICPA, SEC, and PCAOB
, Which of the following primarily shapes the context in which auditing takes place? -
ANSWER: The client's business environment.
An "integrated audit" includes - ANSWER: A financial statement audit and an audit of
internal control over financial reporting.
What are Statements on Auditing Standards (SASs)? - ANSWER: Pronouncements
issued by the Auditing Standards Board of the AICPA that serve as interpretations of
GAAS (applicable to audits of "non-issuers").
List the three field work standards for Generally Accepted Auditing Standards
(GAAS). think PIE - ANSWER: 1 P for Planning and supervision
2 I for Internal control
3 E for Evidence.
List the four reporting standards for Generally Accepted Auditing Standards (GAAS).
think GCDO - ANSWER: 1 G for GAAP
2 C for Consistency
3 D for Disclosure
4 O for Opinion
List the three general standards for Generally Accepted Auditing Standards (GAAS).
think TID - ANSWER: 1 T for Training
2 I for Independence
3 D for Due Professional Care
What are some considerations that must be given by the auditor during the planning
phase of the audit? - ANSWER: 1. Determine whether to accept or continue the audit
engagement
2. Assess the risk of material misstatement
3. Evaluate requirements for staffing and supervision
4. Prepare the required written audit program (also called the "audit plan").
What considerations should be given by the auditor regarding internal controls prior
to beginning an audit or performing substantive audit procedures? - ANSWER:
1.Obtain the required understanding of the design of internal control for planning
purposes.
2.Perform tests of controls to evaluate operating effectiveness of internal control if
contemplating reliance on specific controls.
List the two types of test of details. - ANSWER: 1. Tests of ending balances
2. Tests of transactions
List the four basic steps in the audit process. - ANSWER: 1. Planning
2. Internal Control Consideration
3. Substantive Audit Procedures
4. Reporting
Systematic Approach, 12th Edition By William Messier Jr,
Steven Glover, Verified Chapters 1 - 21, Complete Newest
Version
The fact that errors and/or omissions in certain relatively insignificant account
balances would not affect an auditor's decision when reporting on the financial
statements as a whole relates most closely to which major audit concept? -
ANSWER: Materiality
Audit evidence - ANSWER: Can be gathered from many sources and is not limited to
the underlying accounting data.
Audit risk - ANSWER: Is the risk that a "clean" opinion will be issued when, in reality,
the financial statements are materially misstated.
The examination of all of a client's transactions would make an audit very costly.
Thus, auditors rely heavily on sampling as a way to obtain evidence. Which of the
following would result in a smaller sample? - ANSWER: A decrease in the desired
level of assurance.
Which of the following audit phases would generally be conducted before all of the
others listed below? - ANSWER: Gaining an understanding of the client's industry.
An auditor's evaluation of the reasonableness of a client's loan loss reserve would
normally be made during which phase of the audit? - ANSWER: Auditing business
processes and related accounts
Gaining an understanding of the client and its environment includes all of the
following areas except - ANSWER: The audit fee and timeline for completion of the
work.
The most favorable type of audit report opinion for the client to receive is - ANSWER:
Unqualified.
The study and practice of auditing is unlike other areas in accounting because it -
ANSWER: Requires common sense and some creativity
The Public Company Accounting Oversight Board [PCAOB] derives its authority to set
and enforce auditing standards for public company audits from - ANSWER: An Act of
Congress
Which of the following is generally not considered one of the five business processes
or cycles? - ANSWER: Information technology
,The five business processes are - ANSWER: Financing, Purchasing, Human Resource
Management, Inventory Management, and Revenue process
Which of the following is NOT a typical responsibility for an associate and/or staff
level auditor? - ANSWER: Assisting in the development of the audit plan.
Prior to the Sarbanes-Oxley Act of 2002, the _________ was responsible for creating
all new auditing standards in the United States. Today, for publicly-held companies,
that responsibility rests with the _____________. - ANSWER: AICPA Auditing
Standards Board [ASB] prior to 2002; PCAOB today.
To exercise due professional care, an auditor should - ANSWER: Critically review the
work performed and judgment exercised by those assisting in the audit
What is the essential meaning of the generally accepted auditing standard that
requires that the auditor be independent? - ANSWER: The auditor must be without
bias with respect to the client under audit.
The principles underlying an audit conducted in accordance with GAAS as developed
by the ASB and the IAASB include all of the following except - ANSWER: The auditor
should plan and conduct the audit to obtain assurance that the financial statements
are free of any misstatement.
The responsibility for implementing sound accounting practices and principles,
maintaining an adequate internal control structure, and making fair representations
in the financial statements rests primarily with the - ANSWER: Senior management.
Which of the following is considered an example of a compliance audit? - ANSWER:
The examination of a company's adherence to government-mandated safety
provisions.
Which of the following best describes the relationship between management and
the board of directors? - ANSWER: Management reports to the board of directors.
Which of the following best describes the roles of the AICPA and the PCAOB in
establishing auditing standards? - ANSWER: All of them, 1 Auditing standards issued
by the AICPA and the PCAOB are considered minimum standards of performance. 2
AICPA sets auditing standards for use in non-public entities. 3 PCAOB sets auditing
standards for use in publicly held companies.
"Mid-tier" firms - ANSWER: Are national in their practices and have international
affiliates.
Which of the following organizations affect the environment that CPAs work in? -
ANSWER: All of the above which includes AICPA, SEC, and PCAOB
, Which of the following primarily shapes the context in which auditing takes place? -
ANSWER: The client's business environment.
An "integrated audit" includes - ANSWER: A financial statement audit and an audit of
internal control over financial reporting.
What are Statements on Auditing Standards (SASs)? - ANSWER: Pronouncements
issued by the Auditing Standards Board of the AICPA that serve as interpretations of
GAAS (applicable to audits of "non-issuers").
List the three field work standards for Generally Accepted Auditing Standards
(GAAS). think PIE - ANSWER: 1 P for Planning and supervision
2 I for Internal control
3 E for Evidence.
List the four reporting standards for Generally Accepted Auditing Standards (GAAS).
think GCDO - ANSWER: 1 G for GAAP
2 C for Consistency
3 D for Disclosure
4 O for Opinion
List the three general standards for Generally Accepted Auditing Standards (GAAS).
think TID - ANSWER: 1 T for Training
2 I for Independence
3 D for Due Professional Care
What are some considerations that must be given by the auditor during the planning
phase of the audit? - ANSWER: 1. Determine whether to accept or continue the audit
engagement
2. Assess the risk of material misstatement
3. Evaluate requirements for staffing and supervision
4. Prepare the required written audit program (also called the "audit plan").
What considerations should be given by the auditor regarding internal controls prior
to beginning an audit or performing substantive audit procedures? - ANSWER:
1.Obtain the required understanding of the design of internal control for planning
purposes.
2.Perform tests of controls to evaluate operating effectiveness of internal control if
contemplating reliance on specific controls.
List the two types of test of details. - ANSWER: 1. Tests of ending balances
2. Tests of transactions
List the four basic steps in the audit process. - ANSWER: 1. Planning
2. Internal Control Consideration
3. Substantive Audit Procedures
4. Reporting
