阿伦斯 审计学：一种整合方法 课后习题答案ch01

Chapter 1

The Demand for Audit and Other Assurance Services

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Review Questions

1-1 The relationship among audit services, attestation services, and assurance services is reflected in Figure 1-3 on page 13 of the text. An assurance service is an independent professional service to improve the quality of information for decision makers. An attestation service is a form of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party. Audit services are a form of attestation service in which the auditor expresses a written conclusion about the degree of correspondence between information and established criteria. The most common form of audit service is an audit of historical financial statements, in which the auditor expresses a conclusion as to whether the financial statements are presented in conformity with generally accepted accounting principles. An example of an attestation service is a report on the effectiveness of an entity’s internal control over financial reporting. There are many possible forms of assurance services, including services related to business performance measurement, health care performance, and information system reliability.

1-2 An independent audit is a means of satisfying the need for reliable information on the part of decision makers. Factors of a complex society which contribute to this need are:

1. Remoteness of information

a. Owners (stockholders) divorced from management b. Directors not involved in day-to-day operations or decisions c. Dispersion of the business among numerous geographic

locations and complex corporate structures

2. Biases and motives of provider

a. Information will be biased in favor of the provider when his or

her goals are inconsistent with the decision maker's goals.

3. Voluminous data

a. Possibly millions of transactions processed daily via

sophisticated computerized systems

b. Multiple product lines c. Multiple transaction locations

4. Complex exchange transactions

a. New and changing business relationships lead to innovative

accounting and reporting problems

b. Potential impact of transactions not quantifiable, leading to

increased disclosures

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1-3 1. 2.

3.

Risk-free interest rate This is approximately the rate the bank could earn by investing in U.S. treasury notes for the same length of time as the business loan.

Business risk for the customer This risk reflects the possibility that the business will not be able to repay its loan because of economic or business conditions such as a recession, poor management decisions, or unexpected competition in the industry.

Information risk This risk reflects the possibility that the information upon which the business risk decision was made was inaccurate. A likely cause of the information risk is the possibility of inaccurate financial statements.

Auditing has no effect on either the risk-free interest rate or business risk. However, auditing can significantly reduce information risk.

1-4 The four primary causes of information risk are remoteness of information, biases and motives of the provider, voluminous data, and the existence of complex exchange transactions. The three main ways to reduce information risk are:

1. User verifies the information. 2. User shares the information risk with management. 3. Audited financial statements are provided.

The advantages and disadvantages of each are as follows: ADVANTAGES DISADVANTAGES USER VERIFIES 1. User obtains information 1. High cost of obtaining INFORMATION desired. information. 2. User can be more 2. Inconvenience to the confident of the person providing the qualifications and activities information because of the person getting the large number of users information. would be on premises. USER SHARES 1. No audit costs incurred. 1. User may not be able INFORMATION to collect on losses. RISK WITH MANAGEMENT AUDITED 1. Multiple users obtain the 1. May not meet needs FINANCIAL information. of certain users. STATEMENTS 2. Information risk can usually 2. Cost may be higher ARE PROVIDED be reduced sufficiently to than the benefits in satisfy users at reasonable some situations, such cost. as for a small 3. Minimal inconvenience to company. management by having only one auditor. 1-2

1-5 To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information. Examples of established criteria include generally accepted accounting principles and the Internal Revenue Code. Determining the degree of correspondence between information and established criteria is determining whether a given set of information is in accordance with the established criteria. The information for Jones Company's tax return is the federal tax returns filed by the company. The established criteria are found in the Internal Revenue Code and all interpretations. For the audit of Jones Company's financial statements the information is the financial statements being audited and the established criteria are generally accepted accounting principles.

1-6 The primary evidence the internal revenue agent will use in the audit of the Jones Company's tax return include all available documentation and other information available in Jones' office or from other sources. For example, when the internal revenue agent audits taxable income, a major source of information will be bank statements, the cash receipts journal and deposit slips. The internal revenue agent is likely to emphasize unrecorded receipts and revenues. For expenses, major sources of evidence are likely to be cancelled checks, vendors' invoices and other supporting documentation.

1-7 This apparent paradox arises from the distinction between the function of auditing and the function of accounting. The accounting function is the recording, classifying and summarizing of economic events to provide relevant information to decision makers. The rules of accounting are the criteria used by the auditor for evaluating the presentation of economic events for financial statements and he or she must therefore have an understanding of generally accepted accounting principles (GAAP), as well as auditing standards. The accountant need not, and frequently does not, understand what auditors do, unless he or she is involved in doing audits, or has been trained as an auditor.

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1-8 PURPOSE OPERATIONAL AUDITS To evaluate whether operating procedures are efficient and effective Management of organization COMPLIANCE AUDITS To determine whether the client is following specific procedures set by higher authority AUDITS OF FINANCIAL STATEMENTS To determine whether the overall financial statements are presented in accordance with specified criteria (usually GAAP) Different groups for different purposes — many outside entities Highly standardized Almost universally Occasionally Never Frequently USERS OF AUDIT REPORT NATURE Authority setting down procedures, internal or external Not standardized, but specific and usually objective Occasionally Frequently Universally Frequently Highly nonstandard; often subjective Frequently Frequently Never Frequently PERFORMED BY: CPAs GAO AUDITORS IRS AUDITORS INTERNAL AUDITORS

1-9 Five examples of specific operational audits that could be conducted by an internal auditor in a manufacturing company are:

1. Examine employee time cards and personnel records to determine

if sufficient information is available to maximize the effective use of personnel.

2. Review the processing of sales invoices to determine if it could be

done more efficiently.

3. Review the acquisitions of goods, including costs, to determine if

they are being purchased at the lowest possible cost considering the quality needed.

4. Review and evaluate the efficiency of the manufacturing process. 5. Review the processing of cash receipts to determine if they are

deposited as quickly as possible.

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1-10 When using a strategic systems auditing approach in an audit of historical financial statements, an auditor must have a thorough understanding of the client and its environment. This knowledge should include the client’s regulatory and operating environment, business strategies and processes, and measurement indicators. The strategic systems approach is also useful in other assurance or consulting engagements. For example, an auditor who is performing an assurance service on information technology would need to understand the client’s business strategies and processes related to information technology, including such things as purchases and sales via the Internet. Similarly, a practitioner performing a consulting engagement to evaluate the efficiency and effectiveness of a client’s manufacturing process would likely start with an analysis of various measurement indicators, including ratio analysis and benchmarking against key competitors.

1-11 The major differences in the scope of audit responsibilities are:

1. CPAs perform audits in accordance with auditing standards of

published financial statements prepared in accordance with generally accepted accounting principles.

2. GAO auditors perform compliance or operational audits in order to

assure the Congress of the expenditure of public funds in accordance with its directives and the law.

3. IRS agents perform compliance audits to enforce the federal tax

laws as defined by Congress, interpreted by the courts, and regulated by the IRS.

4. Internal auditors perform compliance or operational audits in order

to assure management or the board of directors that controls and policies are properly and consistently developed, applied and evaluated.

1-12 The four parts of the Uniform CPA Examination are: Auditing and Attestation, Financial Accounting and Reporting, Regulation, and Business Environment and Concepts.

1-13 It is important for CPAs to be knowledgeable about e-commerce technologies because more of their clients are rapidly expanding their use of e-commerce. Examples of commonly used e-commerce technologies include purchases and sales of goods through the Internet, automatic inventory reordering via direct connection to inventory suppliers, and online banking. CPAs who perform audits or provide other assurance services about information generated with these technologies need a basic knowledge and understanding of information technology and e-commerce in order to identify and respond to risks in the financial and other information generated by these technologies.

? Multiple Choice Questions From CPA Examinations

1-14 a. (3) b. (2) c. (2) d. (3)

1-15 a. (2) b. (3) c. (4) d. (3)

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