Solution Manual For Auditing A Practical Approach with Data Analytics, 2nd Edition by Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton-R1.1 An assurance service is any service provided
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Solution Manual For Auditing A Practical Approach with Data Analytics, 2nd Edition by Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton-R1.1 An assurance service is any service provided by an independent practitioner that improves the quality of information, or its context, for decision makers. An independent practitioner
can verify that the information meets relevant criteria, which provides assurance to users who
intend to use the information for decision making. An assurance engagement has three parties:
the assurance provider (auditor/practitioner), the party responsible for providing the information
(client), and the intended users of the information (investors/lenders/others who rely on the information).
LO 1, BT: C, Difficulty: Easy, TOT: 5 min., AACSB: None, AICPA AC: Risk Assessment, Analysis and Management,
Section: Assurance, Attestation, and Audit Services
R1.2 The criterion used in a financial statement audit to measure and evaluate subject matter is
the applicable financial reporting framework used by the client. The most common framework
used in the U.S. is Generally Accepted Accounting Principles (GAAP).
LO 1, BT: C, Difficulty: Easy, TOT: 5 min., AACSB: None, AICPA AC: Measurement Analysis and Interpretation, Section: Assurance, Attestation, and Audit Services
R1.3 Financial statements are not guaranteed to be free from error or fraud due to several limitations. These limitations include the nature of financial reporting, the nature of audit procedures
and the need for the audit to be conducted within a reasonable period of time and within a reasonable budget. The nature of financial reporting causes limitations because it includes management‘s judgment when applying accounting standards and estimates. The nature of the audit procedures is a limitation because the auditors have to rely on management to provide all the
necessary documentation needed for the audit. The auditor may arrive at an inappropriate conclusion if information is tampered with or excluded. The last limitation refers to the limited resources of time and money for an audit engagement. It would be impractical for auditors to examine every transaction. Therefore, auditors rely on sampling measures to provide an accurate
representation of the population, and sampling cannot provide absolute assurance.
LO 2, BT: C, Difficulty: Medium, TOT: 15 min., AACSB: None, AICPA AC: Risk Assessment, Analysis and Management,
Section: Different Assurance Services
R1.4 Management and those charged with governance can request an operational audit to help
improve the efficiency and effectiveness of a company‘s operations. An organization‘s internal
audit department typically conducts operational audits.
LO 2, BT: C, Difficulty: Easy, TOT: 5 min., AACSB: None, AICPA BC: Governance Perspective, Section: Different Assurance Services
R1.5 Investors are interested in the information that financial statements can provide about their
investment. This includes, but is not limited to, information regarding the profitability of the company, return on investment, going concern/continuity of operations, and dividend distributions.
An independent audit helps to ensure that the information in the financial statements is credible
and of high quality.
LO 3, BT: C, Difficulty: Easy, TOT: 10 min., AACSB: None, AICPA BC: Governance Perspective, Section: Demand for
Audit and Assurance Services
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