SOLUTION MANUAL FOR
Principles Of Auditing And Other Assurance Services
23rd Edition By Ray Whittington Kurt
ALL Chapters (1 - 21)
, Table of Contents
g2 g2
Chapterg21:g2Theg2Roleg2ofg2theg2Publicg2Accountantg2ing2theg2AmericanEconomy
Chapterg22:g2Professionalg2Standards
Chapterg23:g2Professionalg2Ethics
Chapterg24:g2Legalg2Liabilityg2ofg2CPAs
Chapterg25:g2Auditg2Evidenceg2andg2Documentation
Chapterg26:g2Auditg2Planning,g2Understandingg2theg2Client,g2AssessingRisks,g2andg2Responding
Chapterg27:g2Internalg2Control
Chapterg28:g2Considerationg2ofg2Internalg2Controlg2ing2ang2InformationTechnologyg2Environment
Chapterg29:g2Auditg2Sampling
Chapterg210:g2Cashg2andg2Financialg2Investments
Chapterg211:g2Accountsg2Receivable,g2Notesg2Receivable,g2andRevenue
Chapterg212:g2Inventoriesg2andg2Costg2ofg2Goodsg2Sold
Chapterg213:g2Property,g2Plant,g2andg2Equipment:g2Depreciationg2andDepletion
Chapterg214:g2Accountsg2Payableg2andg2Otherg2Liabilities
Chapterg215:g2Debtg2andg2Equityg2Capital
Chapterg216:g2Auditingg2Operationsg2andg2Completingg2theg2Audit
Chapterg217:g2Auditors’g2Reports
Chapterg218:g2Integratedg2Auditsg2ofg2Publicg2Companies
Chapterg219:g2Additionalg2Assuranceg2Services:g2Historicalg2FinancialInformation
Chapterg220:g2Additionalg2Assuranceg2Services:g2Otherg2Information
Chapterg221:g2Internal,g2Operational,g2andg2Complianceg2Auditing
,CHAPTER 1 g2
The Role of the Pub
g2 g2 g2 g2
lic Accountant in the
g2 g2 g2
American Economy g2
Reviewg2Questions
1-1 Theg2―crisisg2ofg2credibility‖g2largelyg2aroseg2fromg2theg2numberg2ofg2companiesg2thatg2restatedg2theirg2previ
ouslyg2issuedg2financialg2statementsg2 asg2 ag2 resultg2 ofg 2 accountingg2irregularitiesg2 andg2fraud.g 2 Especiallyg2
responsibleg2wereg2theg2veryg2visibleg2Enrong2andg2WorldComg2fraudg2cases.g2Bothg2companiesg2 filedg2forg2
bankruptcyg2andg2constitutedg2theg2largestg2 companiesg2 ing2Americang2historyg2tog2dog2so.g 2 Theg2extentg2 ofg
2 theg2accountingg2irregularitiesg2 andg2fraudg2beingg2investigatedg2andg2disclosedg2broughtg2 intog2questiong2t
heg2effectivenessg2 ofg2 financialg2statementg2 audits.g 2 Ing2addition,g2theg2criminalg2convictiong2ofg2Arthurg2A
ndersen,g2LLP,g2oneg2ofg2theg2theng2Bigg25g2accountingg2firms,g2ong2chargesg2 ofg2 destroyingg2documentsg2 re
latedg2tog2theg2Enrong2caseg2broughtg2 intog2questiong2theg2ethicsg2 standardsg2 ofg2theg2profession.
1-2 Assuranceg2servicesg2areg2professionalg2servicesg2thatg2enhanceg2theg2qualityg2ofg2information,g2org2itsg2co
ntext,g2forg2decision-
making.g2Theg2twog2typesg2are:g2(a)g2thoseg2thatg2increaseg2theg2reliabilityg2ofg2informationg2andg2(b)g2thos
eg2thatg2involveg2puttingg2informationg2ing2ag2formg2org2contextg2thatg2facilitatesg2decision-making.
1-3 Ag2financialg2statementg2 auditg2 is,g2byg2far,g2theg2mostg2 commong2typeg2ofg2 attestg2 engagement.g 2 Theg2over
allg2assertion,g2madeg2byg2management,g2mostg2frequentlyg2isg2thatg2theg2financialg2statementsg2followg2gener
allyg2acceptedg2accountingg2principles.
1-4 Ag2largeg2corporationg2withg2securitiesg2listedg2ong2ag2stockg2exchangeg2isg2requiredg2byg2theg2rulesg2ofg2theg2
stockg2exchangeg2andg2byg2theg2rulesg2 ofg2 theg2Securitiesg2 andg2Exchangeg2Commissiong2tog2provideg2ang2au
ditg2 reportg2 withg2theg2annualg2financialg2statementsg2 furnishedg2tog2itsg2 stockholders.g 2 Itg2 alsog2isg2 requiredg2
tog2engageg2theg2auditorsg2 tog2provideg2ang2opiniong2ong2itsg2internalg2control.g2Apartg2fromg2legalg2require
ments,g2however,g2ag2largeg2listedg2corporationg2recognizesg2thatg2itg2mustg2 maintaing2investorg2confidenceg
2ing2 theg2reliabilityg2ofg2 itsg2 financialg2statementsg 2 andg2 internalg2 controlg2 overg2 financialg2 reportingg2 ifg2 itg 2
isg2 tog2continueg2tog2 beg2ableg2tog2 secureg2capitalg2fromg2theg2public.g2 Theg2reportg2 byg2ag2firmg2ofg2certifiedg
2publicg2accountantsg2 addsg2 credibilityg2tog2theg2financialg2statementsg2 preparedg2byg2theg2corporation.g 2 W
heng2ag2 smallg2family-
ownedg2enterpriseg2electsg2 tog2haveg2ang2audit,g2theg2purposeg2usuallyg2isg2 tog2useg2theg2auditors'g2reportg2tog2
supportg2ang2applicationg2 forg2ag2bankg2loan.
, 1-5 Ag2reportg2 byg2ang2independentg2 publicg2accountantg2 concerningg2theg2fairnessg2 ofg2ag2 company'sg2 financial
g2statementsg2isg2commonly g2requiredg2ing2theg2followingg2situations:
(1) Applicationg2forg2 ag2 bankg2loan.
(2) Establishingg2creditg2 forg2 purchaseg2ofg2 merchandise,g2equipment,g2org2 otherg2 assets.
(3) Reportingg2operatingg2results,g2 financialg2position,g2 andg2cashg2flowsg2 tog2absenteeg2ownersg 2 (sto
ckholdersg2org2partners).
(4) Issuanceg2ofg2 securitiesg2 byg2ag2 corporation.
(5) Annualg2financialg2statementsg2 byg2ag2 corporationg2withg2securitiesg2 listedg2ong2ag2 stockg2exchang
eg2org2 tradedg2overg2theg2counter.
(6) Saleg2ofg2 ang2ongoingg2business.
(7) Terminationg2ofg2 ag2 partnership.
1-6 Tog2addg2credibilityg2tog2financialg2statementsg2 isg2tog2increaseg2theg2likelihoodg2thatg2 theyg2haveg2beeng2pre
paredg2followingg2theg2appropriateg2criteria,g2usuallyg2generallyg2acceptedg2accountingg2principles.g 2 Asg2 su
ch,g2ang2increaseg2ing2credibilityg2resultsg2 ing2financialg2statementsg2 thatg2 cang2beg2believedg2andg2reliedg2upo
ng2byg2thirdg2parties.
1-7 Businessg2 riskg2isg2 theg2riskg2thatg2 theg2investmentg2 willg2beg2impairedg2becauseg2ag2 companyg2investedg2in
g2isg2 unableg2tog2meetg2 itsg2 financialg2obligationsg2 dueg2tog2economicg2conditionsg2org2poorg2managementg2 d
ecisions.g2Informationg2riskg2isg2theg2riskg2thatg2theg2informationg2usedg2tog2assessg2businessg2riskg2isg2not
g2accurate.g2Auditorsg2cang2directlyg2reduceg2informationg2risk,g2butg2haveg2onlyg2limitedg2effectg2ong2busi
nessg2risk.
1-8 Atg2theg2beginningg2ofg2theg2century,g2theg2principalg2objectiveg2ofg2auditingg2wasg2 theg2preventiong2andg2det
ectiong2ofg2fraud.g2 Auditg2 workg2centeredg2ong2theg2balanceg2sheet,g2becauseg2theg2incomeg2statementg2 wasg2
regardedg2asg2 highlyg2confidentialg2andg2notg2 forg2 publicg2disclosure.g 2 Today,g2 theg2principalg2objectiveg2
ofg2 auditingg2isg2 tog2formg2ang2opiniong2ong2theg2fairnessg2ofg2financialg2statementsg2 andg2theirg2conformityg
2withg2generallyg2acceptedg2accountingg2principles.g 2 Butg2 theg2professionalg2 standardsg2 alsog2 requireg2thatg2
ang2auditg2 beg2designedg2tog2provideg2reasonableg2assuranceg2ofg2 detectingg2materialg2 misstatements,g2 dueg2
tog2errorsg2 org2 fraud.g 2 Particularg2 emphasisg 2 isg2 placedg2 ong2theg2incomeg2statementg2 whichg2isg2 ofg2greatg
2 importanceg2tog2investors.g2 Auditingg2todayg2alsog2hasg2 theg2objectivesg2 ofg2meetingg2theg2requirementsg2 ofg
2 theg2Securitiesg2 andg2Exchangeg2Commissiong2(SEC)g2 andg2theg2Publicg2Companyg2Accountingg2Oversig
htg2Boardg2forg2publicg2companies.
1-9 Theg2statementg2 isg2 incorrect.g2Theg2increasingg2integratedg2databasesg2 ofg 2 today,g2alongg2withg2avai
lableg2auditg2proceduresg2makeg2auditedg2entireg2populationsg2ag2possibilityg2ing2manyg2situations.
1-10 Ang2operationalg2auditg2attemptsg2 tog2measureg2theg2effectivenessg2 andg2efficiencyg2ofg2ag2specificg2unitg
2 ofg2ang2organization.g2 Itg2 involvesg2 moreg2subjectiveg2judgmentsg2 thang2ag2complianceg2auditg2 org2ang2a
uditg2 ofg2financialg2statementsg2 becauseg2theg2criteriag2 ofg2 effectivenessg2 andg2efficiencyg2ofg2 departme
ntalg2performanceg2areg2notg2 asg2clearlyg2establishedg2asg2 areg2manyg2lawsg2 andg2regulationsg2org2generall
yg2acceptedg2accountingg2principles.
Theg2reportg2 preparedg2afterg2 completiong2ofg2 ang2operationalg2auditg2 isg2 usuallyg2directedg2tog2ma
nagementg2ofg2theg2organizationg2ing2whichg2theg2auditg2workg2wasg2done.
1-11 Ag2complianceg2auditg2isg2ang2auditg2tog2determineg2whetherg2financialg2reportsg2org2otherg2assertionsg2areg2
ing2complianceg2withg2establishedg2criteria.g 2 Theg2necessaryg2ingredientsg2 areg2verifiableg2datag2andg2theg2
existenceg2ofg2standardsg2 establishedg2byg2ang2authoritativeg2body.g 2 Ang2operationalg2audit,g2ong2theg2othe
rg2 hand,g2isg2 ag2 reviewg2ofg2 ag2departmentg2 org2otherg2unitg2ofg2ag2businessg2 org2governmentalg2organization
g2tog2measureg2theg2effectivenessg2 andg2efficiencyg2ofg2 operations.g 2 Internalg2auditorsg2 ofteng2performg2ope
rationalg2auditsg2 asg2 dog2auditorsg2 employedg2byg2theg2Governmentg2Accountabilityg2Officeg2(GAO)g2ofg
Principles Of Auditing And Other Assurance Services
23rd Edition By Ray Whittington Kurt
ALL Chapters (1 - 21)
, Table of Contents
g2 g2
Chapterg21:g2Theg2Roleg2ofg2theg2Publicg2Accountantg2ing2theg2AmericanEconomy
Chapterg22:g2Professionalg2Standards
Chapterg23:g2Professionalg2Ethics
Chapterg24:g2Legalg2Liabilityg2ofg2CPAs
Chapterg25:g2Auditg2Evidenceg2andg2Documentation
Chapterg26:g2Auditg2Planning,g2Understandingg2theg2Client,g2AssessingRisks,g2andg2Responding
Chapterg27:g2Internalg2Control
Chapterg28:g2Considerationg2ofg2Internalg2Controlg2ing2ang2InformationTechnologyg2Environment
Chapterg29:g2Auditg2Sampling
Chapterg210:g2Cashg2andg2Financialg2Investments
Chapterg211:g2Accountsg2Receivable,g2Notesg2Receivable,g2andRevenue
Chapterg212:g2Inventoriesg2andg2Costg2ofg2Goodsg2Sold
Chapterg213:g2Property,g2Plant,g2andg2Equipment:g2Depreciationg2andDepletion
Chapterg214:g2Accountsg2Payableg2andg2Otherg2Liabilities
Chapterg215:g2Debtg2andg2Equityg2Capital
Chapterg216:g2Auditingg2Operationsg2andg2Completingg2theg2Audit
Chapterg217:g2Auditors’g2Reports
Chapterg218:g2Integratedg2Auditsg2ofg2Publicg2Companies
Chapterg219:g2Additionalg2Assuranceg2Services:g2Historicalg2FinancialInformation
Chapterg220:g2Additionalg2Assuranceg2Services:g2Otherg2Information
Chapterg221:g2Internal,g2Operational,g2andg2Complianceg2Auditing
,CHAPTER 1 g2
The Role of the Pub
g2 g2 g2 g2
lic Accountant in the
g2 g2 g2
American Economy g2
Reviewg2Questions
1-1 Theg2―crisisg2ofg2credibility‖g2largelyg2aroseg2fromg2theg2numberg2ofg2companiesg2thatg2restatedg2theirg2previ
ouslyg2issuedg2financialg2statementsg2 asg2 ag2 resultg2 ofg 2 accountingg2irregularitiesg2 andg2fraud.g 2 Especiallyg2
responsibleg2wereg2theg2veryg2visibleg2Enrong2andg2WorldComg2fraudg2cases.g2Bothg2companiesg2 filedg2forg2
bankruptcyg2andg2constitutedg2theg2largestg2 companiesg2 ing2Americang2historyg2tog2dog2so.g 2 Theg2extentg2 ofg
2 theg2accountingg2irregularitiesg2 andg2fraudg2beingg2investigatedg2andg2disclosedg2broughtg2 intog2questiong2t
heg2effectivenessg2 ofg2 financialg2statementg2 audits.g 2 Ing2addition,g2theg2criminalg2convictiong2ofg2Arthurg2A
ndersen,g2LLP,g2oneg2ofg2theg2theng2Bigg25g2accountingg2firms,g2ong2chargesg2 ofg2 destroyingg2documentsg2 re
latedg2tog2theg2Enrong2caseg2broughtg2 intog2questiong2theg2ethicsg2 standardsg2 ofg2theg2profession.
1-2 Assuranceg2servicesg2areg2professionalg2servicesg2thatg2enhanceg2theg2qualityg2ofg2information,g2org2itsg2co
ntext,g2forg2decision-
making.g2Theg2twog2typesg2are:g2(a)g2thoseg2thatg2increaseg2theg2reliabilityg2ofg2informationg2andg2(b)g2thos
eg2thatg2involveg2puttingg2informationg2ing2ag2formg2org2contextg2thatg2facilitatesg2decision-making.
1-3 Ag2financialg2statementg2 auditg2 is,g2byg2far,g2theg2mostg2 commong2typeg2ofg2 attestg2 engagement.g 2 Theg2over
allg2assertion,g2madeg2byg2management,g2mostg2frequentlyg2isg2thatg2theg2financialg2statementsg2followg2gener
allyg2acceptedg2accountingg2principles.
1-4 Ag2largeg2corporationg2withg2securitiesg2listedg2ong2ag2stockg2exchangeg2isg2requiredg2byg2theg2rulesg2ofg2theg2
stockg2exchangeg2andg2byg2theg2rulesg2 ofg2 theg2Securitiesg2 andg2Exchangeg2Commissiong2tog2provideg2ang2au
ditg2 reportg2 withg2theg2annualg2financialg2statementsg2 furnishedg2tog2itsg2 stockholders.g 2 Itg2 alsog2isg2 requiredg2
tog2engageg2theg2auditorsg2 tog2provideg2ang2opiniong2ong2itsg2internalg2control.g2Apartg2fromg2legalg2require
ments,g2however,g2ag2largeg2listedg2corporationg2recognizesg2thatg2itg2mustg2 maintaing2investorg2confidenceg
2ing2 theg2reliabilityg2ofg2 itsg2 financialg2statementsg 2 andg2 internalg2 controlg2 overg2 financialg2 reportingg2 ifg2 itg 2
isg2 tog2continueg2tog2 beg2ableg2tog2 secureg2capitalg2fromg2theg2public.g2 Theg2reportg2 byg2ag2firmg2ofg2certifiedg
2publicg2accountantsg2 addsg2 credibilityg2tog2theg2financialg2statementsg2 preparedg2byg2theg2corporation.g 2 W
heng2ag2 smallg2family-
ownedg2enterpriseg2electsg2 tog2haveg2ang2audit,g2theg2purposeg2usuallyg2isg2 tog2useg2theg2auditors'g2reportg2tog2
supportg2ang2applicationg2 forg2ag2bankg2loan.
, 1-5 Ag2reportg2 byg2ang2independentg2 publicg2accountantg2 concerningg2theg2fairnessg2 ofg2ag2 company'sg2 financial
g2statementsg2isg2commonly g2requiredg2ing2theg2followingg2situations:
(1) Applicationg2forg2 ag2 bankg2loan.
(2) Establishingg2creditg2 forg2 purchaseg2ofg2 merchandise,g2equipment,g2org2 otherg2 assets.
(3) Reportingg2operatingg2results,g2 financialg2position,g2 andg2cashg2flowsg2 tog2absenteeg2ownersg 2 (sto
ckholdersg2org2partners).
(4) Issuanceg2ofg2 securitiesg2 byg2ag2 corporation.
(5) Annualg2financialg2statementsg2 byg2ag2 corporationg2withg2securitiesg2 listedg2ong2ag2 stockg2exchang
eg2org2 tradedg2overg2theg2counter.
(6) Saleg2ofg2 ang2ongoingg2business.
(7) Terminationg2ofg2 ag2 partnership.
1-6 Tog2addg2credibilityg2tog2financialg2statementsg2 isg2tog2increaseg2theg2likelihoodg2thatg2 theyg2haveg2beeng2pre
paredg2followingg2theg2appropriateg2criteria,g2usuallyg2generallyg2acceptedg2accountingg2principles.g 2 Asg2 su
ch,g2ang2increaseg2ing2credibilityg2resultsg2 ing2financialg2statementsg2 thatg2 cang2beg2believedg2andg2reliedg2upo
ng2byg2thirdg2parties.
1-7 Businessg2 riskg2isg2 theg2riskg2thatg2 theg2investmentg2 willg2beg2impairedg2becauseg2ag2 companyg2investedg2in
g2isg2 unableg2tog2meetg2 itsg2 financialg2obligationsg2 dueg2tog2economicg2conditionsg2org2poorg2managementg2 d
ecisions.g2Informationg2riskg2isg2theg2riskg2thatg2theg2informationg2usedg2tog2assessg2businessg2riskg2isg2not
g2accurate.g2Auditorsg2cang2directlyg2reduceg2informationg2risk,g2butg2haveg2onlyg2limitedg2effectg2ong2busi
nessg2risk.
1-8 Atg2theg2beginningg2ofg2theg2century,g2theg2principalg2objectiveg2ofg2auditingg2wasg2 theg2preventiong2andg2det
ectiong2ofg2fraud.g2 Auditg2 workg2centeredg2ong2theg2balanceg2sheet,g2becauseg2theg2incomeg2statementg2 wasg2
regardedg2asg2 highlyg2confidentialg2andg2notg2 forg2 publicg2disclosure.g 2 Today,g2 theg2principalg2objectiveg2
ofg2 auditingg2isg2 tog2formg2ang2opiniong2ong2theg2fairnessg2ofg2financialg2statementsg2 andg2theirg2conformityg
2withg2generallyg2acceptedg2accountingg2principles.g 2 Butg2 theg2professionalg2 standardsg2 alsog2 requireg2thatg2
ang2auditg2 beg2designedg2tog2provideg2reasonableg2assuranceg2ofg2 detectingg2materialg2 misstatements,g2 dueg2
tog2errorsg2 org2 fraud.g 2 Particularg2 emphasisg 2 isg2 placedg2 ong2theg2incomeg2statementg2 whichg2isg2 ofg2greatg
2 importanceg2tog2investors.g2 Auditingg2todayg2alsog2hasg2 theg2objectivesg2 ofg2meetingg2theg2requirementsg2 ofg
2 theg2Securitiesg2 andg2Exchangeg2Commissiong2(SEC)g2 andg2theg2Publicg2Companyg2Accountingg2Oversig
htg2Boardg2forg2publicg2companies.
1-9 Theg2statementg2 isg2 incorrect.g2Theg2increasingg2integratedg2databasesg2 ofg 2 today,g2alongg2withg2avai
lableg2auditg2proceduresg2makeg2auditedg2entireg2populationsg2ag2possibilityg2ing2manyg2situations.
1-10 Ang2operationalg2auditg2attemptsg2 tog2measureg2theg2effectivenessg2 andg2efficiencyg2ofg2ag2specificg2unitg
2 ofg2ang2organization.g2 Itg2 involvesg2 moreg2subjectiveg2judgmentsg2 thang2ag2complianceg2auditg2 org2ang2a
uditg2 ofg2financialg2statementsg2 becauseg2theg2criteriag2 ofg2 effectivenessg2 andg2efficiencyg2ofg2 departme
ntalg2performanceg2areg2notg2 asg2clearlyg2establishedg2asg2 areg2manyg2lawsg2 andg2regulationsg2org2generall
yg2acceptedg2accountingg2principles.
Theg2reportg2 preparedg2afterg2 completiong2ofg2 ang2operationalg2auditg2 isg2 usuallyg2directedg2tog2ma
nagementg2ofg2theg2organizationg2ing2whichg2theg2auditg2workg2wasg2done.
1-11 Ag2complianceg2auditg2isg2ang2auditg2tog2determineg2whetherg2financialg2reportsg2org2otherg2assertionsg2areg2
ing2complianceg2withg2establishedg2criteria.g 2 Theg2necessaryg2ingredientsg2 areg2verifiableg2datag2andg2theg2
existenceg2ofg2standardsg2 establishedg2byg2ang2authoritativeg2body.g 2 Ang2operationalg2audit,g2ong2theg2othe
rg2 hand,g2isg2 ag2 reviewg2ofg2 ag2departmentg2 org2otherg2unitg2ofg2ag2businessg2 org2governmentalg2organization
g2tog2measureg2theg2effectivenessg2 andg2efficiencyg2ofg2 operations.g 2 Internalg2auditorsg2 ofteng2performg2ope
rationalg2auditsg2 asg2 dog2auditorsg2 employedg2byg2theg2Governmentg2Accountabilityg2Officeg2(GAO)g2ofg
