Principles of Auditing and Other Assurance Services 19th edition by Whittington (Author), Kurt Pany (Author) solutions manual and test bank

 Principles of Auditing and Other Assurance Services  19th edition by  Whittington (Author), Kurt Pany (Author) solutions manual and test bank (in Word)

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CHAPTER 2 solutions manual

                         Professional Standards

Review Questions

2–1         The Sarbanes-Oxley Act of 2002 created the PCAOB and gave this body authority to develop auditing standards for the audits of public companies.  The AICPA has the authority, based on general acceptance (and adoption by state boards of accountancy and other regulatory bodies), to develop auditing standards for audits of nonpublic companies.

2–2         Generally accepted accounting principles are accounting principles that have substantial authoritative support, such as approval by the Governmental Accounting Standards Board or the Financial Accounting Standards Board.  These standards provide the criteria (financial reporting framework) for financial reporting, including the nature and content of financial statements.  Generally accepted auditing standards are those issued by the AICPA’s Auditing Standards Board (ASB).  GAAS are the standards for the auditor’s work in fulfilling the overall objectives of a financial statement audit.  GAAS address the general responsibilities of the auditor, as well as the auditor’s further considerations relevant to the application of those responsibilities.

                           

2–3         A financial reporting framework is a set of criteria used to determine measurement, recognition, representation, and disclosure of all material items appearing in the financial statements; for example, United States GAAP or IFRS.  It is important to an audit because it is through consideration of that framework on which the auditor bases his or her opinion on the financial statements.

2–4         Generally accepted auditing standards are the Statements on Auditing Standards issued by the Auditing Standards Board.

2–5         In the context of the audit of financial statements, professional skepticism includes maintaining a questioning mind, being alert to conditions that may indicate possible misstatement due to fraud or error, and a critical assessment of audit evidence.  Throughout the audit the auditors should be alert for: (1) audit evidence that contradicts other audit evidence, (2) information that raises a question about the reliability of documents and responses to inquiries, (3) conditions indicating possible fraud, and (4) circumstances suggesting the need for additional audit procedures beyond those ordinarily required.

2–6         The auditors' responsibilities concerning the detection of noncompliance with laws by clients depends on the relationship of the law or regulation to the financial statements.  Certain laws and regulations, such as income tax laws, have a direct effect on the amounts and disclosures included in the financial statements.  The auditors have a responsibility to design their audit to obtain reasonable assurance of detecting material violations of these laws and regulations.

Many other laws and regulations, such as occupational safety and health laws, do not have a direct effect on the amounts included in the financial statements.  An audit carried out in accordance with generally accepted auditing standards is not designed to detect client noncompliance with these other laws.

ch2 test bank 

Student: ___________________________________________________________________________

1.	To express an opinion on financial statements, the auditor obtains reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.    True    False

2.	The auditors' report on a corporation's financial statements usually is addressed to the president of the company.    True    False

3.	The auditors are primarily responsible for preparing the financial statements and expressing an opinion on whether they follow generally accepted auditing standards.    True    False

4.	Partners in CPA firms usually have the responsibility for signing the audit report.    True    False

5.	An audit is more likely to detect tax evasion than violations of antitrust laws.    True    False

6.	The attestation standards do not supersede generally accepted auditing standards.    True    False