Solution Manual For Auditing A Practical Approach with
Data Analytics, 2nd Edition Raymond N. Johnson, Laura
Davis Wiley, Robyn Moroney, Fiona Campbell, Jane
Hamilton Chapter 1-16
CHAPTERi1
IntroductioniandiOverviewiofiAuditiandiAssurance
LearningiObjectives
1. Differentiateiamongiassurance,iattestation,iandiauditingiservices.
2. Describeitheidifferentitypesiofiassuranceiservices.
3. Explainitheidemandiforiauditiandiassuranceiservices.
4. Discussitheidifferentirolesiofitheifinancialistatementipreparerianditheiauditor.
5. Identifyitheirolesiofidifferentiregulatorsiandiorganizationsithatiaffectitheiauditiprofession.
6. Explainitheiconceptsiofireasonableiassurance,imateriality,ianditheinatureiofianiunquali-
ified/unmodifiedireportionitheiauditiofifinancialistatements.
7. Explainitheiconceptiofireasonableiassuranceianditheinatureiofianiunqualifiedireportioniint
ernalicontrolsioverifinancialireporting.
8. Discussitheiauditiexpectationigap.
ANSWERSiTOiMULTIPLE-CHOICEiQUESTIONS
1. C
LOi1,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSection:i
Assurance,iAttestation,iandiAuditiServices
2. A
LOi2,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSection:i
DifferentiAssuranceiServices
3. B
LOi2,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSection:i
DifferentiAssuranceiServices
4. C
1i|i©i2022iJohniWileyiandiSons,iInc. ForiInstructoriUseiOnly
,LOi2,iBT:iC,iDifficulty:iMedium,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSecti
on:iDifferentiAssuranceiServices
5. C
LOi3,iBT:iC,iDifficulty:iMedium,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSecti
on:iDemandiforiAuditiandiAssuranceiServices
2i|i©i2022iJohniWileyiandiSons,iInc. ForiInstructoriUseiOnly
,6. B
LOi4,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSection:i
PreparersiandiAuditors
7. A
LOi5,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iReporting,iSection:iTheiRoleiofiRegulatorsiandiRegula
tions
8. D
LOi5,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiBC:iGovernanceiPerspective,iSection:iTheiRoleiofiRegulat
orsiandiRegulations
9. D
LOi6,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSection:i
AuditiReportioniFinancialiStatements
10. C
LOi6,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iReporting,iSection:iAuditiReportionitheiFinancialiState
ments
11. B
LOi7,iBT:iC,iDifficulty:iEasy,iTOT:i2imin.,iAACSB:iNone,iAICPAiAC:iReporting,iSection:iAuditiReportioniInternaliControlsi
overiFinancialiReporting
12. B
LOi8,iBT:iC,iDifficulty:iMedium,iTOT:i2imin.,iAACSB:iNone,iAICPAiPC:iProfessionaliBehavior,iSection:iTheiAuditiExpectati
oniGap
ANSWERSiTOiREVIEWiQUESTIONS
R1.1iAniassuranceiserviceiisianyiserviceiprovidedibyianiindependentipractitionerithatiim-
iprovesitheiqualityiofiinformation,ioriitsicontext,iforidecisionimakers.iAniindependentipractitionerica
niverifyithatitheiinformationimeetsirelevanticriteria,iwhichiprovidesiassuranceitoiusersiwhoiintendit
oiuseitheiinformationiforidecisionimaking.iAniassuranceiengagementihasithreeiparties:itheiassura
nceiprovideri(auditor/practitioner),itheipartyiresponsibleiforiprovidingitheiinformationi(client),iandit
heiintendediusersiofitheiinformationi(investors/lenders/othersiwhoirelyionitheiin-iformation).
LOi1,iBT:iC,iDifficulty:iEasy,iTOT:i5imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSection:i
Assurance,iAttestation,iandiAuditiServices
R1.2iTheicriterioniusediiniaifinancialistatementiaudititoimeasureiandievaluateisubjectimatteriisithei
applicableifinancialireportingiframeworkiusedibyitheiclient.iTheimosticommoniframework
3i|i©i2022iJohniWileyiandiSons,iInc. ForiInstructoriUseiOnly
, usediinitheiU.S.iisiGenerallyiAcceptediAccountingiPrinciplesi(GAAP).
LOi1,iBT:iC,iDifficulty:iEasy,iTOT:i5imin.,iAACSB:iNone,iAICPAiAC:iMeasurementiAnalysisiandiInterpretation,iSec-
ition:iAssurance,iAttestation,iandiAuditiServices
R1.3iFinancialistatementsiareinotiguaranteeditoibeifreeifromierroriorifraudidueitoiseveralilimi-
itations.iTheseilimitationsiincludeitheinatureiofifinancialireporting,itheinatureiofiauditiproceduresian
ditheineediforitheiaudititoibeiconductediwithiniaireasonableiperiodiofitimeiandiwithiniairea-
isonableibudget.iTheinatureiofifinancialireportingicausesilimitationsibecauseiitiincludesiman-
iagement‘sijudgmentiwheniapplyingiaccountingistandardsiandiestimates.iTheinatureiofitheiau-
iditiproceduresiisiailimitationibecauseitheiauditorsihaveitoirelyionimanagementitoiprovideiallitheine
cessaryidocumentationineedediforitheiaudit.iTheiauditorimayiarriveiatianiinappropriateicon-
iclusioniifiinformationiisitamperediwithioriexcluded.iTheilastilimitationirefersitoitheilimitedire-
isourcesiofitimeiandimoneyiforianiauditiengagement.iItiwouldibeiimpracticaliforiauditorsitoiex-
iamineieveryitransaction.iTherefore,iauditorsirelyionisamplingimeasuresitoiprovideianiaccurateirep
resentationiofitheipopulation,iandisamplingicannotiprovideiabsoluteiassurance.
LOi2,iBT:iC,iDifficulty:iMedium,iTOT:i15imin.,iAACSB:iNone,iAICPAiAC:iRiskiAssessment,iAnalysisiandiManagement,iSect
ion:iDifferentiAssuranceiServices
R1.4iManagementiandithoseichargediwithigovernanceicanirequestianioperationaliaudititoihelpiim
proveitheiefficiencyiandieffectivenessiofiaicompany‘sioperations.iAniorganization‘siinternaliauditid
epartmentitypicallyiconductsioperationaliaudits.
LOi2,iBT:iC,iDifficulty:iEasy,iTOT:i5imin.,iAACSB:iNone,iAICPAiBC:iGovernanceiPerspective,iSection:iDifferentiAs-
isuranceiServices
R1.5iInvestorsiareiinterestediinitheiinformationithatifinancialistatementsicaniprovideiaboutitheir
investment.iThisiincludes,ibutiisinotilimitedito,iinformationiregardingitheiprofitabilityiofitheicom-
ipany,ireturnioniinvestment,igoingiconcern/continuityiofioperations,iandidividendidistributions.iAnii
ndependentiauditihelpsitoiensureithatitheiinformationiinitheifinancialistatementsiisicredibleiandiofi
highiquality.
LOi3,iBT:iC,iDifficulty:iEasy,iTOT:i10imin.,iAACSB:iNone,iAICPAiBC:iGovernanceiPerspective,iSection:iDemandiforiAuditi
andiAssuranceiServices
R1.6iBothitheipreparerianditheiauditorihaveiresponsibilitiesiregardingitheicompany‘sifinancialistat
ements.iManagementi(theipreparer)iisiinichargeiofipreparingitheifinancialistatements.iThisiinclude
siensuringitheiinformationiisipresentedifairlyiandiinicomplianceiwithiGAAP,ioriotheriap-
iplicableifinancialireportingiframework.iManagementiisiresponsibleiforidesigning,iimplementing,ia
ndimaintainingiinternalicontrolioverifinancialireporting,iasiwelliasiprovidingiauditorsiwithiallitheinec
essaryidocumentationiandipersonnelineededitoicompleteitheiaudit.iAuditorsiareiresponsibleiforipr
ovidingianiopinionioniwhetheritheifinancialistatementsiareipresentedifairlyiandiiniaccord-
ianceiwithitheiapplicableifinancialireportingiframework.iTheithreeiresponsibilitiesiofiauditorsiareitoi
conductitheiauditiiniaccordanceiwithitheiappropriateiauditistandards,iplaniandiperformitheiauditiwit
hiprofessionaliskepticism,iandiexerciseiprofessionalijudgment.
LOi4,iBT:iC,iDifficulty:iMedium,iTOT:i15imin.,iAACSB:iNone,iAICPAiAC:iReporting,iSection:iPreparersiandiAuditors
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