PROFDOCSTUDYHUB
PR
SOLUTION MANUAL
Principles of Auditing & Other Assurance Services
O
Ray Whittington, Kurt Pany
FD
22nd Edition
O
Chapter 1-21
C
,PROFDOCSTUDYHUB
PR
• Table of Contents
Chapter 1: The Role of the Public Accountant in the AmericanEconomy
O
Chapter 2: Professional Standards
FD
Chapter 3: Professional Ethics
Chapter 4: Legal Liability of CPAs
Chapter 5: Audit Evidence and Documentation
O
Chapter 6: Audit Planning, Understanding the Client, AssessingRisks, and Responding
C
Chapter 7: Internal Control
Chapter 8: Consideration of Internal Control in an InformationTechnology Environment
Chapter 9: Audit Sampling
Chapter 10: Cash and Financial Investments
Chapter 11: Accounts Receivable, Notes Receivable, andRevenue
Chapter 12: Inventories and Cost of Goods Sold
Chapter 13: Property, Plant, and Equipment: Depreciation andDepletion
Chapter 14: Accounts Payable and Other Liabilities
Chapter 15: Debt and Equity Capital
Chapter 16: Auditing Operations and Completing the Audit
Chapter 17: Auditors’ Reports
Chapter 18: Integrated Audits of Public Companies
Chapter 19: Additional Assurance Services: Historical FinancialInformation
Chapter 20: Additional Assurance Services: Other Information
Chapter 21: Internal, Operational, and Compliance Auditing
,PROFDOCSTUDYHUB
PR
CHAPTER 1
O
FD
The Role of the
Public Accountant in
the
O
American Economy
C
Review Questions
1-1 The ―crisis of credibility‖ largely arose from the number of companies that restated their
previously issued financial statements as a result of accounting irregularities and fraud.
Especially responsible wereithe very visible Enron and WorldCom fraud cases. Both companies
filed for bankruptcy and constituted the largest companies in American history to do so. The
extent of the accounting irregularities and fraud being investigated and disclosed brought into
question the effectiveness of financial statement audits. In addition, the criminal conviction of
Arthur Andersen, LLP, one of the then Big 5 accounting firms, on charges of destroying
documents related to the Enron case brought into question the ethics standards of the
profession.
1-2 Assurance services are professional services that enhance the quality of information, or its
context, for decision-making. The two types are: (a) those that increase the reliability of
information and (b) those that involve putting information in a form or context that facilitates
decision-making.
1-3 A financial statement audit is, by far, the most common type of attest engagement. The
overall assertion,imade by management, most frequently is that the financial statements follow
generally accepted accounting principles.
1-4 A large corporation with securities listed on a stock exchange is required by the rules of the
stock exchange and by the rules of the Securities and Exchange Commission to provide an
audit report with theiannual financial statements furnished to its stockholders. It also is
required to engage the auditors to provide an opinion on its internal control. Apart from legal
requirements, however, a large listed corporation recognizes that it must maintain investor
confidence in the reliability of its financial statements and internal control over financial
reporting if it is to continue to be able to secure capital from the public. The report by a
firm of certified public accountants adds credibility to the financial statements prepared by the
corporation. When a small family-owned enterprise elects to have an audit, the purpose
, PROFDOCSTUDYHUB
usually is to use the auditors' report to support an application for a bank loan.
PR
O
FD
O
C
PR
SOLUTION MANUAL
Principles of Auditing & Other Assurance Services
O
Ray Whittington, Kurt Pany
FD
22nd Edition
O
Chapter 1-21
C
,PROFDOCSTUDYHUB
PR
• Table of Contents
Chapter 1: The Role of the Public Accountant in the AmericanEconomy
O
Chapter 2: Professional Standards
FD
Chapter 3: Professional Ethics
Chapter 4: Legal Liability of CPAs
Chapter 5: Audit Evidence and Documentation
O
Chapter 6: Audit Planning, Understanding the Client, AssessingRisks, and Responding
C
Chapter 7: Internal Control
Chapter 8: Consideration of Internal Control in an InformationTechnology Environment
Chapter 9: Audit Sampling
Chapter 10: Cash and Financial Investments
Chapter 11: Accounts Receivable, Notes Receivable, andRevenue
Chapter 12: Inventories and Cost of Goods Sold
Chapter 13: Property, Plant, and Equipment: Depreciation andDepletion
Chapter 14: Accounts Payable and Other Liabilities
Chapter 15: Debt and Equity Capital
Chapter 16: Auditing Operations and Completing the Audit
Chapter 17: Auditors’ Reports
Chapter 18: Integrated Audits of Public Companies
Chapter 19: Additional Assurance Services: Historical FinancialInformation
Chapter 20: Additional Assurance Services: Other Information
Chapter 21: Internal, Operational, and Compliance Auditing
,PROFDOCSTUDYHUB
PR
CHAPTER 1
O
FD
The Role of the
Public Accountant in
the
O
American Economy
C
Review Questions
1-1 The ―crisis of credibility‖ largely arose from the number of companies that restated their
previously issued financial statements as a result of accounting irregularities and fraud.
Especially responsible wereithe very visible Enron and WorldCom fraud cases. Both companies
filed for bankruptcy and constituted the largest companies in American history to do so. The
extent of the accounting irregularities and fraud being investigated and disclosed brought into
question the effectiveness of financial statement audits. In addition, the criminal conviction of
Arthur Andersen, LLP, one of the then Big 5 accounting firms, on charges of destroying
documents related to the Enron case brought into question the ethics standards of the
profession.
1-2 Assurance services are professional services that enhance the quality of information, or its
context, for decision-making. The two types are: (a) those that increase the reliability of
information and (b) those that involve putting information in a form or context that facilitates
decision-making.
1-3 A financial statement audit is, by far, the most common type of attest engagement. The
overall assertion,imade by management, most frequently is that the financial statements follow
generally accepted accounting principles.
1-4 A large corporation with securities listed on a stock exchange is required by the rules of the
stock exchange and by the rules of the Securities and Exchange Commission to provide an
audit report with theiannual financial statements furnished to its stockholders. It also is
required to engage the auditors to provide an opinion on its internal control. Apart from legal
requirements, however, a large listed corporation recognizes that it must maintain investor
confidence in the reliability of its financial statements and internal control over financial
reporting if it is to continue to be able to secure capital from the public. The report by a
firm of certified public accountants adds credibility to the financial statements prepared by the
corporation. When a small family-owned enterprise elects to have an audit, the purpose
, PROFDOCSTUDYHUB
usually is to use the auditors' report to support an application for a bank loan.
PR
O
FD
O
C
