SOLUTION MANUAL FOR Auditing A Practical Approach with Data Analytics, 2nd Edition Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton

SOLUTION MANUAL FOR Auditing A Practical Approach with Data Analytics, 2nd Edition Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton-R1.1 An assurance service is any service provided by ...

SOLUTION MANUAL FOR Auditing A Practical Approach with Data Analytics, 2nd Edition 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 For Instructor Use Only 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 R1.6 Both the preparer and the auditor have responsibilities regarding the company‘s financial statements. Management (the preparer) is in charge of preparing the financial statements. This includes ensuring the information is presented fairly and in compliance with GAAP, or other applicable financial reporting framework. Management is responsible for designing, implementing, and maintaining internal control over financial reporting, as well as providing auditors with all the necessary documentation and personnel needed to complete the audit. Auditors are responsible for providing an opinion on whether the financial statements are presented fairly and in accordance with the applicable financial reporting framework. The three responsibilities of auditors are to conduct the audit in accordance with the appropriate audit standards, plan and perform the audit with professional skepticism, and exercise professional judgment.