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共26章內(nèi)容，其中第1章部分答案示例如下
Chapter1
TheDemand for Audit and Other Assurance Services
< ConceptChecks
P.8
1. To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor canevaluate the information. Determining the degree of correspondence betweeninformation and established criteria is determining whether a given set ofinformation is in accordance with the established criteria. For an audit of acompany’s financial statements the criteria are U.S. generally acceptedaccounting principles or International Financial Reporting Standards.
2. Thefour primary causes of information risk are remoteness of information, biases and motives of the provider, voluminousdata, and the existence of complex exchange transactions.
The three main ways to reduce informationrisk are:
1. User verifies the information.
2. User shares the information risk withmanagement.
3. Audited financial statements areprovided.
P.17
1. Thethree main types of audits are operational audits, compliance audits, andfinancial statement audits. The table below summarizes the purposes and natureof each type of audit.
|
| OPERATIONAL | COMPLIANCE | AUDITS OF |
| PURPOSE | To evaluate whether operating procedures are efficient and effective | To determine whether the client is following specific procedures set by a higher authority | To determine whether the overall financial statements are presented in accordance with specified criteria (usually GAAP) |
Concept Checks (continued)
|
| OPERATIONAL | COMPLIANCE | AUDITS OF |
| USERS OF AUDIT REPORT | Management of organization | Authority setting down procedures, internal or external | Different groups for different purposes — many outside entities |
NATURE | Highly nonstandard; often subjective | Not standardized, but specific and usually objective | Highly standardized |
| PERFORMED BY: | Frequently | Occasionally | Almost universally |
| GAO | Frequently | Frequently | Occasionally |
| IRS | Never | Universally | Never |
| INTERNAL | Frequently | Frequently | Frequently* |
*Internal auditors may assist CPAs in the audit of financial statements.Internal auditors may also audit internal financial statements for use bymanagement.
2. Themajor differences in the scope of audit responsibilities for CPAs, GAOauditors, IRS agents, and internal auditors are:
· CPAs perform audits of financial statements prepared using U.S. GAAP or IFRSin accordance with auditing standards.
· GAO auditors perform compliance oroperational audits in order to assure theCongress of the expenditure of public funds in accordance with itsdirectives and the law.
· IRSagents perform compliance audits to enforce the federal tax laws as defined by Congress, interpreted by thecourts, and regulated by the IRS.
· Internal auditors perform compliance oroperational audits in order to assure management or the board of directors thatcontrols and policies are properly andconsistently developed, applied, and evaluated.
< ReviewQuestions
1-1 To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor canevaluate the information. The information for Jones Company's tax return is thefederal tax returns filed by the company. The established criteria are found in the Internal RevenueCode and all interpretations. For the audit of Jones Company'sfinancial statements the information is thefinancial statements being audited and the established criteria are U.S. GAAPor IFRS.
1-2 This apparent paradox arises from thedistinction between the function of auditing and the function of accounting.The accounting function is the recording, classifying, and summarizing ofeconomic events to provide relevant information to decision makers. The rulesof accounting are the criteria used by the auditor for evaluating thepresentation of economic events for financial statements and he or she musttherefore have an understanding of accounting standards, as well as auditingstandards. The accountant need not, and frequently does not, understand whatauditors do, unless he or she is involved in doing audits, or has been trainedas an auditor.1-3 An independent audit is a means of satisfying theneed for reliable information on the part of decision makers. Recentchanges in accounting and business operations include:
1. Increased global activities of manybusinesses
a. Multiple product lines and transactionlocations
b. Foreign exchange affects transactions
2. Complex accounting and exchangetransactions
a. Increasing use of derivatives andhedging activities
b. Increasingly complex accountingstandards in areas such as revenue recognition
3. Morecomplex information systems
a. Possibly millions of transactionsprocessed daily through on-line and traditional sales channels
b. Voluminous data requires interpretation
1-4 1. Risk-free interest rate This is approximately the rate the bank couldearn by investing in U.S. treasury notes for the same length of time as thebusiness loan.
2. Businessrisk for the customer This risk reflects the possibility that the business will not be able torepay its loan because of economic or business conditions such as a recession,poor management decisions, or unexpected competition in the industry.
3. Informationrisk This risk reflects the possibility that the information upon which thebusiness risk decision was made was inaccurate. A likely cause of theinformation risk is the possibility of inaccurate financial statements.
Auditing has no effect on either therisk-free interest rate or business risk. However, auditing can significantlyreduce information risk.
1-5 The three main ways to reduce information riskare:
1. User verifies the information.
2. User shares the information risk withmanagement.
3. Audited financial statements are provided.
The advantages and disadvantages of eachare as follows:
|
| ADVANTAGES | DISADVANTAGES |
| USER VERIFIES INFORMATION | 1. User obtains information desired. 2. User can be more confident of the qualifications and activities of the person getting the information. | 1. High cost of obtaining information. 2. Inconvenience to the person providing the information because large number of users would be on premises. |
| USER SHARES INFORMATION RISK WITH MANAGEMENT | 1. No audit costs incurred. | 1. User may not be able to collect on losses. |
| AUDITED FINANCIAL STATEMENTS ARE PROVIDED | 1. Multiple users obtain the information. 2. Information risk can usually be reduced sufficiently to satisfy users at reasonable cost. 3. Minimal inconvenience to management by having only one auditor. | 1. May not meet needs of certain users. 2. Cost may be higher than the benefits in some situations, such as for a small company. |
1-6 Information risk is the risk that information upon whicha business decision is made is inaccurate. Fair value accounting is often basedon estimates and requires judgment. Fair value can be estimated using multiplemethods with some estimates being more subjective than others. Fair valueestimates are made at a point in time, but can also change rapidly, dependingon market conditions. All of these factors increase information risk.
1-7 An assuranceservice is an independent professional service to improve the quality ofinformation for decision makers. An attestation service is a form of assuranceservice in which the CPA firm issues a report about the reliability of anassertion that is the responsibility of another party. Audit services are aform of attestation service in which theauditor expresses a written conclusion about the degree ofcorrespondence between information and established criteria.
1-7 (continued)
The most common form of audit service isan audit of historical financial statements,in which the auditor expresses a conclusion as to whether the financialstatements are presented in accordance with an applicable financial reportingframework such as U.S. GAAP or IFRS. An example of an attestation service is areport on the effectiveness of an entity’s internal control over financial reporting. There are many possible forms ofassurance services, including services related to business performancemeasurement, health care performance, and informationsystem reliability.
1-8 The primary evidence the internal revenue agentwill use in the audit of the Jones Company's tax return include all availabledocumentation and other information available in Jones’ office or from othersources. For example, when the internal revenue agent audits taxable income, amajor source of information will be bank statements, the cash receipts journaland deposit slips. The internal revenue agent is likely to emphasize unrecordedreceipts and revenues. For expenses, major sources of evidence are likely to becancelled checks and electronic fundstransfers, vendors' invoices, and other supporting documentation.
1-9 Five examples of specific operational auditsthat could be conducted by an internal auditor in a manufacturing company are:
1. Examine employeetime records and personnel records to determine if sufficient information isavailable to maximize the effective use of personnel.
2. Review the processing of sales invoicesto determine if it could be done more efficiently.
3. Review theacquisitions of goods, including costs, to determine if theyare being purchased at the lowest possible cost considering the quality needed.
4. Review and evaluate the efficiency ofthe manufacturing process.
5. Review the processing of cash receiptsto determine if they are deposited as quickly as possible.
1-10 Whenauditing historical financial statements, an auditor must have a thoroughunderstanding of the client and its environment. This knowledge should includethe client’s regulatory and operating environment, business strategies andprocesses, and measurement indicators. This strategic understanding is alsouseful in other assurance or consulting engagements. For example, an auditorwho is performing an assurance service on information technology would need tounderstand the client’s business strategies and processes related toinformation technology, including such thingsas purchases and sales via the Internet. Similarly, a practitionerperforming a consulting engagement to evaluate the efficiency and effectivenessof a client’s manufacturing process would likely start with an analysis ofvarious measurement indicators, including ratio analysis and benchmarkingagainst key competitors.
1-11 The four parts of the Uniform CPA Examination are:Auditing and Attestation, Financial Accounting and Reporting,Regulation, and Business Environment and Concepts.
< Multiple Choice Questions From CPAExaminations
1-12 a. (3) b. (2) c. (1)
1-13 a. (2) b. (4) c. (2)
< Multiple Choice Questions From BeckerCPA Exam Review
1-14 a. (4) b. (1) c. (3)
< DiscussionQuestions And Problems
1-15 a. Audit services are a form of attestationservice, and attestation services are a formof assurance service. In a diagram, audit services are located within theattestation service area, and attestationservices are located within the assurance service area.
b. 1. (2) An attestation service other than anaudit service
2. (1) Anaudit of historical financial statements
3. (3) Anassurance or nonassurance service that is not an
attestation service
4. (2) Anattestation service other than an audit service
5. (2) Anattestation service other than an audit service
6. (2) An attestation service other than an auditservice
7. (2) An attestation service other than an auditservice
8. (2) An attestation service other than an auditservice
9. (2) Anattestation service other than an audit service
(Review servicesare a form of attestation, but are performed accordingto Statements on Standards for Accounting and Review Services.)
10. (2) Anattestation service other than an audit service
11. (3) Anassurance or nonassurance service that is not an
attestation service
1-16 a. Theinterest rate for the loan that requires a review report is lower than the loanthat did not require a review because of lower information risk. A reviewreport provides moderate assurance to financial statement users, which lowersinformation risk. An audit report provides further assurance and lowerinformation risk. As a result of reduced information risk, the interest rate islowest for the loan with the audit report.
1-16 (continued)
b. Given these circumstances, Busch shouldselect the loan from First City Bank that requires an annual audit. In thissituation, the additional cost of the audit is less than the reduction ininterest due to lower information risk. The following is the calculation oftotal costs for each loan:
| LENDER | CPA SERVICE | COST OF CPA SERVICES | ANNUAL INTEREST | ANNUAL LOAN COST |
| Existing loan | None | 0 | $ 360,000 | $ 360,000 |
| United National Bank | Review | $ 35,000 | $ 300,000 | $ 335,000 |
| First City Bank | Audit | $ 60,000 | $ 240,000 | $ 300,000 |
c. Busch should select the loan from UnitedNational Bank due to the higher cost of the audit and the reduced interest ratefor the loan from United National Bank. The following is the calculation oftotal costs for each loan:
| LENDER | CPA SERVICE | COST OF CPA SERVICES | ANNUAL INTEREST | ANNUAL LOAN COST |
| Existing loan | None | 0 | $ 360,000 | $ 360,000 |
| United National Bank | Review | $ 35,000 | $ 270,000 | $ 305,000 |
| First City Bank | Audit | $ 80,000 | $ 240,000 | $ 320,000 |
d. Busch may desire to have an audit becauseof the many other benefits that anaudit provides. The audit will provide Busch’s management with assurance about annual financialinformation used fordecision-making purposes. The audit may detect errors or fraud, and provide management with information about theeffectiveness of controls. Inaddition, the audit may result in recommendations to management that will improve efficiency or effectiveness.
e. The auditor must have a thorough understanding ofthe client and its environment,including the client’s e-commerce technologies, industry, regulatory andoperating environment, suppliers, customers, creditors, and business strategiesand processes. This thorough analysishelps the auditor identify risks associated with the client’s strategies thatmay affect whether the financial statements are fairly stated. This strategicknowledge of the client’s business often helps the auditor identify ways tohelp the client improve business operations, thereby providing added value tothe audit function.
1-17 a. Theservices provided by Consumers Union are very similar to assurance servicesprovided by CPA firms. The services provided by Consumers Union and assuranceservices provided by CPA firms are designed to improve the quality ofinformation for decision makers. CPAs are valued for their independence, andthe reports provided by Consumers Union are valued because Consumers Union isindependent of the products tested.
b. The concepts of information risk forthe buyer of an automobile and for the user of financial statements areessentially the same. They are both concerned with the problem of unreliableinformation being provided. In the case of the auditor, the user is concernedabout unreliable information being provided in the financial statements. Thebuyer of an automobile is likely to be concerned about the manufacturer ordealer providing unreliable information.
c. The four causes of information risk areessentially the same for a buyer of an automobile and a user of financialstatements:
(1) Remotenessof information It is difficult for a user to obtain much information about either anautomobile manufacturer or the automobile itself without incurring considerablecost. The automobile buyer does have the advantage of possibly knowing otherusers who are satisfied or dissatisfied with a similar automobile, and theability to perform online research of new vehicles.
(2) Biasesand motives of provider There is a conflict between the automobile buyer and the manufacturer.The buyer wants to buy a high qualityproduct at minimum cost whereas the seller wants to maximize the sellingprice and quantity sold.
(3) Voluminous data There is a largeamount of available information about automobiles thatusers might like to have in order to evaluate an automobile. Either thatinformation is not available or too costly to obtain.
(4) Complex exchange transactions The acquisition ofan automobile is expensive and certainly a complex decisionbecause of all the components that go into making a good automobile and choosing between a large number of alternatives.
1-17 (continued)
d. The three waysusers of financial statements and buyers of automobiles reduce information risk are also similar:
(1) User verifies information him or herself That can beobtained by driving different automobiles, examining the specificationsof the automobiles, talking to other users and doing research in variousmagazines.
(2) User shares information risk with management The manufacturer of a product has a responsibility to meetits warranties and to provide a reasonable product. The buyer ofan automobile can return the automobile for correction of defects. In somecases a refund may be obtained.
(3) Examinethe information prepared by Consumer Reports This issimilar to an audit in the sense that independent information is provided by an independent party.The information provided by Consumer Reports is comparable to that provided by a CPA firm in an audit offinancial statements.
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