Auditing and Assurance Services Louwers 4th Edition Solutions Manual

Auditing and Assurance Services Louwers 4th Edition Solutions Manual

Availability: In stock

$34.00

Name: Auditing and Assurance Services
Author: Louwers Ramsay Sinason Strawser
Edition: 4th
ISBN-10: 0078136644

Top reasons to buy Auditing and Assurance Services Louwers 4th Edition Solutions Manual from us:

Best Price:
  • Your motto is to go for the least and our policy is to reduce costs as low as possible like Auditing and Assurance Services Louwers 4th Edition Solutions Manual
Fast Access:
  • Test banks are often bought for instant use and reference, may be for an exam that you need to prepare for tonight. Our instant access system ensures immediate delivery as soon as the payment is cleared with absolutely no waiting time
Support:
  • Customer service is always willing to help you, 24 hours a day, seven days a week.
Extremely safe:
  • Secure connection and payment system ( 256 bit SSL - Secure Socket Layer )
  • We never share your information to third party.

Auditing and Assurance Services
Auditing and Assurance Services Louwers Ramsay Sinason Strawser
Auditing and Assurance Services Louwers Ramsay Sinason Strawser 4th
Auditing and Assurance Services Louwers Ramsay Sinason Strawser 4th Solutions Manual
Auditing and Assurance Services Louwers 4th Edition Solutions Manual

***THIS IS NOT THE ACTUAL BOOK. YOU ARE BUYING the Solutions Manual in e-version of the following book***

Name: Auditing and Assurance Services
Author: Louwers Ramsay Sinason Strawser
Edition: 4th
ISBN-10: 0078136644
Type: Solutions Manual

– The file is either in pdf, doc, rtf or zipped in the package and can easily be read on PCs and Macs.

– Delivery is INSTANT. You can download the files IMMEDIATELY once payment is done.

We also faced similar difficulities when we were students, and we understand how you feel.
But now, with the Auditing and Assurance Services 4th Solutions Manual, you will be able to

* Anticipate the type of the questions that will appear in your exam.
* Reduces the hassle and stress of your student life.
* Improve your studying and also get a better grade!
* Get prepared for examination questions.
* Can save you time and help you understand the material.

This is the quality of service we are providing and we hope to be your helper.
Delivery is in the next moment. Solutions Manual is accurate.

Prepare to receive your Auditing and Assurance Services 4th Solutions Manual in the next moment.
ISBN-10: 0078136644

If you have any questions, or would like a receive a sample chapter before your purchase, please contact us at contact@lovetestbank.com

Auditing and Assurance Services
Auditing and Assurance Services Louwers Ramsay Sinason Strawser
Auditing and Assurance Services Louwers Ramsay Sinason Strawser 4th
Auditing and Assurance Services Louwers Ramsay Sinason Strawser 4th Solutions Manual
Auditing and Assurance Services Louwers 4th Edition Solutions Manual

CHAPTER 2
Professional Standards

SOLUTIONS FOR REVIEW CHECKPOINTS

2.1 For independent (external) auditors of financial statements, practice standards are issued by the AICPA Auditing Standards Board (in the form of Statements on Auditing Standards) and the Public Company Accounting Oversight Board (in the form of Auditing Standards). Statements on Auditing Standards are appropriate for the audits of nonpublic entities, while Auditing Standards are appropriate for the audits of public entities.

For governmental auditors, the Government Accountability Office issues Government Auditing Standards (also known as the “Yellow Book”).

For internal auditors, the Institute of Internal Auditors issues Statements of Internal Auditing Standards (also known as the “Red Book”).

For fraud auditors, the Association of Certified Fraud Examiners issues Professional Standards and Practices for Certified Fraud Examiners.

For auditors in other countries, the IFAC International Auditing and Assurance Standards Board issues International Standards on Auditing and Assurance.

2.2 Generally accepted auditing standards are standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination.

Generally accepted accounting principles represent the requirements for the preparation and presentation of financial statements and accompanying footnote disclosures.

These two types of standards are related to one another because a primary objective of a GAAS audit is to allow auditors to conclude whether an entity’s financial statements are prepared and presented in conformity with GAAP.

2.3 The three fundamental principles are:

1. Responsibilities, which involves having appropriate competence and capabilities, complying with relevant ethical requirements, maintaining professional skepticism and exercising professional judgment.

2. Performance, which requires auditors to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement by: (1) planning the work and properly supervising assistants; (2) determining and applying appropriate material levels; (3) identifying and assessing the risk of material misstatement; and, (4) obtaining sufficient appropriate audit evidence.

3. Reporting, which requires the auditor to express an opinion as to whether the financial statements are prepared in accordance with the applicable financial reporting framework.

Auditing procedures relate to acts to be performed during the engagement. Auditing standards deal with measures of the quality of performance of those acts and the objectives to be attained. Auditing standards are less subject to change and provide the criteria for rejecting, accepting, or modifying auditing procedures in a given circumstance.

An example of the relative stability of standards and procedures is found in the change from non computerized information systems to computerized information systems. New auditing procedures were required to evaluate computerized information systems, but auditing standards remained unchanged and were the criteria for determining the adequacy of the new auditing procedures.

2.4 Independence in fact represents auditors’ mental attitudes (do auditors truly act in an unbiased and impartial fashion with respect to the client and fairness of its financial statements?). Independence in appearance relates to financial statement users’ perceptions of auditors’ independence.

Auditors can be independent in fact but not perceived to be independent. For example, ownership of a small interest in a public client would probably not influence auditors’ behavior with respect to the client. However, it is likely that third-party users would not perceive auditors to be independent.

2.5 Due care reflects a level of performance that would be exercised by reasonable auditors in similar circumstances. Auditors are expected to have the skills and knowledge of others in their profession (known as that of a prudent auditor) and are not expected to be infallible.

2.6 Professional skepticism is a state of mind that is characterized by appropriate questioning and a critical assessment of audit evidence.

Professional judgment is the auditors’ application of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement.

Auditors are required to demonstrate professional skepticism and professional judgment throughout the entire audit process.

2.7 Reasonable assurance recognizes that a GAAS audit may not detect all material misstatements and auditors are not “insurers” or “guarantors” regarding the fairness of the company’s financial statements. The following characteristics of an audit do not permit auditors to provide absolute assurance:
• Mistakes and misinterpretations may occur
• Management judgments and estimates affect financial reporting
• Audit procedures cannot always be relied upon to detect misstatements
• Audit engagements must be conducted within a reasonable period of time and so as to achieve a balance between benefit and cost.

2.8 Three elements of planning and supervision considered essential in audit practice are:
• A written audit plan.
• An understanding of the client’s (auditee’s) business.
• Policies to allow an audit team member to document disagreements with accounting or auditing conclusions and disassociate him or herself from the matter.

2.9 The timing of the auditors’ appointment is important because auditors need time to properly plan the audit and perform the necessary work without undue pressure from tight deadlines.

2.10 Materiality is the dollar amount that would influence the lending or investing decisions of users; this concept recognizes that auditors should focus on matters that are important to financial statement users. Materiality should be considered in planning the audit, performing the audit, and evaluating the effect of misstatements on the entity’s financial statements.

2.11 Auditors obtain an understanding of a client, including its internal control, as a part of the control risk assessment process primarily in order to plan the nature, timing and extent of substantive audit procedures. A secondary purpose is because of auditors’ responsibilities for reporting on client’s internal controls under Auditing Standard No. 5.

2.12 As the client’s internal control is more effective (a lower level of control risk), auditors may use less effective substantive procedures (a higher level of detection risk). Conversely, when the client’s internal control is less effective (a higher level of control risk), auditors must use more effective substantive procedures (a lower level of detection risk).
2.13 Audit evidence is defined as the information used by auditors in arriving at the conclusion on which the audit opinion is based.

2.14 External documentary evidence is audit evidence obtained from another party to an arm’s length transaction or from outside independent agencies. External evidence is received directly by auditors and is not processed through the client’s information processing system.

External internal documentary evidence is documentary material that originates outside the bounds of the client’s information processing system but which has been received and processed by the client.

Internal documentary evidence consists of documentary material that is produced, circulates, and is finally stored within the client’s information processing system. Such evidence is either not circulated to outside parties at all or is several steps removed from third-party attention.

2.15 In general, evidence that is completely external in nature is most reliable, because the client has not influenced its processing. In contrast, evidence that is completely internal in nature is least reliable, as it may represent a fictitious transaction created or modified by client personnel to enhance perceptions of the client’s financial statements.

2.16 As auditors need to achieve lower levels of detection risk, more appropriate evidence needs to be obtained. Thus, auditors should gather higher quality evidence (more reliable evidence). For example, auditors may choose to obtain evidence from external sources rather than internal sources.

In addition, for lower levels of detection risk, auditors need to gather more sufficient evidence. Because sufficiency relates to the quantity of evidence, a greater number of transactions or components of an account balance should be examined.

2.17 A financial reporting framework is a set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statements. The financial reporting framework is related to auditors’ reporting responsibilities because this framework serves as the basis against which the financial statements are evaluated and the auditors’ opinion on the financial statements is expressed.

2.18 Four types of opinions and their conclusions:

Type Conclusion

Unqualified opinion Financial statements are presented in conformity with GAAP.

Adverse opinion Financial statements are not presented in conformity with GAAP.

Qualified opinion Financial statements are presented in conformity with GAAP, except for one or more departures or issues of concern.

Disclaimer of opinion An opinion cannot be issued on the financial statements.
2.19 The auditors’ report is dated at the point when all significant procedures have been completed by auditors and auditors have gathered sufficient appropriate evidence. This date is referred to as the audit completion date.

2.20 Public accountants should issue a report when they are associated with financial statements because users may mistakenly assume that an audit has been conducted and that the entity’s financial statements are fairly presented according to GAAP.
2.21 The purpose served by the attestation standards is to guide work in attestation areas and engagements other than audits of financial statements.

2.22 The major differences between attestation standards and generally accepted auditing standards (GAAS) lie in the areas of practitioner competence, materiality and the risk of material misstatement, and reporting.

GAAS presume knowledge of accounting and require competence and capabilities as auditors (meaning auditors of financial statements). The attestation standards are more general, requiring training and proficiency in the “attest function” and knowledge of the “subject matter of the assertions.”

The attestation standards have no specific requirement for determining materiality levels or obtaining and understanding of the entity and its environment to assess the risk of material misstatement. Because attestation engagements may cover information not confined to accounting and financial assertions, these activities may not be appropriate for all attest engagements.

Reporting is different because attestations on nonfinancial information do not depend upon generally accepted accounting principles. In addition, GAAS do not address two reporting issues (stating significant reservations about the engagement and indicating that the report is only intended for specified parties) that are important reporting aspects for attestation engagements.

2.23 A system of quality control provides firms with reasonable assurance that the firm and its personnel (1) comply with professional standards and applicable regulatory and legal requirements and (2) issue reports that are appropriate in the circumstances.

The six elements of a system of quality control are:
1. Leadership responsibilities for quality within the firm (“tone at the top”)
2. Relevant ethical requirements
3. Acceptance and continuance of clients
4. Human resources
5. Engagement performance
6. Monitoring

2.24 In deciding whether to accept or continue an engagement with a client, firms should consider:

• The integrity of the client and the identity and business reputation of its owners, key management, related parties, and those charged with governance.
• Whether the firm possesses the competency, capability, and resources to perform the engagement.
• Whether the firm can comply with the necessary legal and ethical requirements.

If firms decide to withdraw from an engagement, the firm should document significant issues, consultations, conclusions, and the basis for any conclusions related to the decision to withdraw.

2.25 Typically, firms that audit nonpublic companies have peer reviews conducted through the AICPA’s Center for Public Company Audit Firms Peer Review Program. While firms that are subject to PCAOB review requirements can elect to have peer reviews conducted under this program, most choose not to do so.

2.26 The PCAOB’s monitoring role for firms providing auditing services to public entities includes registering public accounting firms and conducting inspections of registered public accounting firms (similar to peer reviews).

2.27 The frequency of PCAOB inspections depends upon the number of audits conducted by member firms. For firms performing audits for more than 100 public companies, inspections are required on an annual basis. For those performing audits for fewer than 100 public companies, inspections are conducted every three years.

SOLUTIONS FOR MULTIPLE CHOICE QUESTIONS

2.28 a. Correct Gathering audit evidence is a component of the performance principle.
b. Incorrect While reasonable assurance is related to gathering audit evidence, this is not one of the categories of principles
c. Incorrect The reporting principle relates to the contents of the auditors’ report
d. Incorrect The responsibilities principle relates to the personal integrity and professional qualifications of auditors.

2.29 a. Incorrect This practice relates to accountants’ competence and capabilities, not due care.
b. Incorrect This practice relates to the reporting principle.
c. Incorrect Sufficiency of evidence relates to the performance principle and not due care.
d. Correct These practices are a part of due care.

2.30 a. Incorrect GAAS relates to the conduct of audit engagements and not overall professional services.
b. Correct Standards within a system of quality control are firm- (rather than auditor-) related.
c. Incorrect GAAP relates to accounting and financial reporting, rather than auditing practices.
d. Incorrect International auditing standards govern the conduct of audits conducted across international borders.

2.31 a. Incorrect Relying more extensively on external evidence is related to the appropriateness (or quality) of evidence.
b. Incorrect Focusing on items with more significant financial effects on the financial statements is related to materiality.
c. Correct Professional skepticism is characterized by appropriate questioning and a critical assessment of audit evidence.
d. Incorrect Financial interests are most closely related to auditors’ independence.

2.32 a. Correct Auditors study internal control to determine the nature, timing, and extent of substantive tests.
b. Incorrect Consulting suggestions are secondary objectives in an audit.
c. Incorrect Information about the entity’s internal control is, at best, indirect evidence about assertions in the financial statements.
d. Incorrect Information about the entity’s internal control provides auditors with little opportunity to learn about changes in accounting principles.

2.33 a. Incorrect External evidence is considered to be relatively reliable.
b. Correct Management representations should least affect auditors’ conclusions, as they have not been validated or corroborated by external parties.
c. Incorrect Auditor-prepared evidence is considered to be the most reliable form of evidence.
d. Incorrect Although a representation of a client employee, inquiry of the entity’s legal counsel is considered more reliable than that of entity management.

2.34 a. Incorrect Inquiry of management should least affect auditors’ conclusions.
b. Incorrect Although very persuasive, auditors’ personal knowledge (choice d) provides the most persuasive evidence
c. Incorrect Observation of a client’s procedures provides evidence on the effectiveness of the client’s internal control, but not the existence assertion for newly-acquired computer equipment.
d. Correct Auditors’ personal knowledge provides the most persuasive evidence.

2.35 a. Incorrect Inquires of client personnel are the least reliable form of evidence.
b. Incorrect While more reliable than inquiries (choice a), inspection of internal documents is relatively low in terms of reliability.
c. Incorrect While sales invoices are documents created by external parties, the fact that these documents were received from client personnel decreases their reliability.
d. Correct Because the statements were received directly from outside parties, this is a more reliable form of evidence than choice (c).

2.36 a. Incorrect Documentation of this nature would not be related to independence.
b. Incorrect While the quality of the documentation and the conclusions included in the documentation might provide information about competence and capabilities, choice (c) is more appropriate.
c. Correct Initials of the preparer and reviewer provide evidence that the documentation was reviewed, which relates to planning and supervision.
d. Incorrect While the quality of the documentation and the conclusions included in the documentation might provide information about sufficient appropriate evidence, choice (c) is more appropriate

2.37 NOTE TO INSTRUCTOR: Since this question asks students to identify the requirement that is not included in attestation standards, the response labeled “correct” is not included in attestation standards and those labeled “incorrect” are included in attestation standards.
a. Incorrect Attestation standards require adequate knowledge of the subject matter.
b. Correct An understanding of the client’s environment (including internal control) is not required under attestation standards, because internal control may not always be relevant to the subject matter of the attestation.
c. Incorrect Attestation standards require sufficient evidence to be gathered.
d. Incorrect Attestation standards require independence in mental attitude.

2.38 NOTE TO INSTRUCTOR: Since this question asks students to identify the concept that is least related to due care, the response labeled “correct” is least related to due care and those labeled “incorrect” are more related to due care.
a. Incorrect Due care requires the level of skills and knowledge of others in the auditors’ profession, which would require independence in fact.
b. Incorrect See choice (a) above.
c. Incorrect Due care refers to the performance of a “prudent” auditor.
d. Correct Due care recognizes that mistakes and misinterpretations may occur during the audit.

2.39 a. Incorrect Internal documents are a relatively low quality of evidence.
b. Incorrect Management representations (and the related verbal inquiries) are the lowest quality of evidence.
c. Incorrect While direct, external evidence is of reasonable quality, it is of lower quality than direct personal knowledge of the auditor (choice d).
d. Correct Direct, personal knowledge of auditors is the most appropriate form of evidence.

2.40 a. Incorrect While it may increase auditors’ knowledge about the client, obtaining an understanding of a client’s internal control does not directly influence auditors’ competence and capabilities.
b. Incorrect Obtaining an understanding of a client’s internal control does not directly influence auditors’ independence.
c. Incorrect Obtaining an understanding of a client’s internal control does not directly help satisfy the quality control standard about audit staff professional development.
d. Correct The primary purpose of obtaining an understanding of a client’s internal control is to plan the nature, timing, and extent of substantive audit procedures on an engagement.

Reviews

Be the first to review “Auditing and Assurance Services Louwers 4th Edition Solutions Manual”