Principles of Auditing and Other Assurance Services 19th Edition Whittington Solutions Manual

Principles of Auditing and Other Assurance Services 19th Edition Whittington Solutions Manual

Product details:

• ISBN-10 ‏ : ‎ 0077804775
• ISBN-13 ‏ : ‎ 978-0077804770
• Author: Whittington/Pany

Whittington/Pany is our market leader in the auditing discipline. While most textbooks use a cycles approach, Whittington/Pany enlists a balance sheet approach – making it particularly straightforward and user-friendly. The 19th Edition of Principles of Auditing & Other Assurance Services provides a carefully balanced presentation of auditing theory and practice. Written in a clear and understandable manner, it is particularly appropriate for students who have had limited or no audit experience. The approach is to integrate auditing material with that of previous accounting financial, managerial, and systems courses.

Table contents:

PART I INTRODUCTION TO FINANCIAL
STATEMENT AUDITING 1
1 An Introduction to Assurance and Financial
Statement Auditing 2
The Study of Auditing 5
The Demand for Auditing and Assurance 6
Principals and Agents 6
The Role of Auditing 7
An Assurance Analogy: The Case of the House Inspector 9
Seller Assertions, Information Asymmetry, and
Inspector Characteristics 9
Desired Characteristics of the House Inspection Service 9
Relating the House Inspection Analogy to Financial
Statement Auditing 10
Management Assertions and Financial Statements 11
Auditing, Attest, and Assurance Services Defined 12
Auditing 13
Attestation 14
Assurance 14
Fundamental Concepts in Conducting a Financial Statement Audit 15
Audit Risk 16
Materiality 17
Evidence Regarding Management Assertions 18
Sampling: Inferences Based on Limited Observations 18
The Audit Process 19
Overview of the Financial Statement Auditing Process 19
Major Phases of the Audit 21
Conclusion 25
Key Terms 26
Review Questions 27
Multiple-Choice Questions 28
Problems 29
Discussion Case 30
Internet Assignments 31
2 The Financial Statement Auditing Environment 34
A Time of Challenge and Change for Auditors 36
Problems and Warning Signs 36
An Explosion of Scandals 36
Government Regulation 37
Back to Basics 38
The Context of Financial Statement Auditing 38
Business as the Primary Context of Auditing 38
A Model of Business 39
Corporate Governance 39
Objectives, Strategies, Processes, Controls, Transactions, and Reports 
39
A Model of Business Processes: Five Components 40
The Financing Process 40
The Purchasing Process 40
The Human Resource Management Process 40
The Inventory Management Process 40
The Revenue Process 40
Relating the Process Components to the Business Model 42
Management Assertions 42
Auditing Standards 43
The Roles of the ASB and the PCAOB 43
The 10 Generally Accepted Auditing Standards 44
Three General Standards 44
Three Standards of Field Work 45
Four Standards of Reporting 46
Statements on Auditing Standards?Interpretations of GAAS 46
Ethics, Independence, and the Code of Professional Conduct 47
The Auditor?s Responsibility for Errors, Fraud, and Illegal Acts 48
Audit Reporting 49
Generally Accepted Accounting Principles as Audit Criteria 50
The Auditor?s Standard Unqualified Audit Report 50
Reasons for Departures from an Unqualified Audit Report 52
Other Types of Audit Reports 52
Public Accounting Firms 53
Organization and Composition 53
Types of Audit, Attest, and Assurance Services 54
Audit Services 55
Attest Services 56
Assurance Services 57
Other Nonaudit Services 58
Types of Auditors 59
External Auditors 59
Internal Auditors 61
Government Auditors 61
Forensic Auditors 62
Organizations That Affect the Public Accounting
Profession 62
American Institute of Certified Public Accountants (AICPA) 64
Securities and Exchange Commission (SEC) 65
Public Company Accounting Oversight Board (PCAOB) 65
Financial Accounting Standards Board (FASB) 66
Conclusion 66
Key Terms 67
Review Questions 68
Multiple-Choice Questions 69
Problems 72
Discussion Case 74
Internet Assignments 75
PART II BASIC AUDITING CONCEPTS: RISK 
ASSESSMENT,
MATERIALITY, AND EVIDENCE 77
3 Risk Assessment and Materiality 78
Audit Risk 80
The Audit Risk Model 80
Use of the Audit Risk Model 82
The Auditor?s Risk Assessment Process 84
Management?s Strategies, Objectives, and Business Risks 84
Business Risks and the Risk of Material Misstatement 84
Understanding the Entity and Its Environment 85
Auditor?s Risk Assessment Procedures 90
Identifying Business Risks 92
Assessing the Risk of Material Misstatement Due
to Error or Fraud 92
Types of Misstatements 93
Conditions Indicative of Material Misstatement Due to Fraud 94
The Fraud Risk Identification Process 95
Discussion among the Audit Team 96
Inquiries of Management and Others 97
Fraud Risk Factors 97
The Auditor?s Response to the Results of the Risk Assessments 102
Evaluation of Audit Test Results 104
Documentation of the Auditor?s Risk Assessment and Response 105
Communications about Fraud to Management,
the Audit Committee, and Others 107
Limitations of the Audit Risk Model 109
Materiality 109
Steps in Applying Materiality 110
An Example 116
Key Terms 118
Review Questions 119
Multiple-Choice Questions 119
Problems 121
Discussion Cases 123
Internet Assignments 125
4 Audit Evidence and Audit Documentation 130
The Relationship of Audit Evidence to the Audit Report 132
Management Assertions 133
Assertions about Classes of Transactions and Events
during the Period 134
Assertions about Account Balances at the Period End 134
Assertions about Presentation and Disclosure 135
Audit Procedures 136
The Concepts of Audit Evidence 137
The Nature of Audit Evidence 138
The Competence of Audit Evidence 138
The Sufficiency of Audit Evidence 140
The Evaluation of Audit Evidence 140
Audit Procedures for Obtaining Audit Evidence 141
Inspection of Records or Documents 141
Inspection of Tangible Assets 142
Reperformance 143
Recalculation 143
Scanning 143
Inquiry 143
Observation 144
Confirmation 145
Analytical Procedures 145
Reliability of the Types of Evidence 146
Audit Documentation 147
Objectives of Audit Documentation 147
Content of Audit Documentation 147
Examples of Audit Documentation 149
Format of Audit Documentation 151
Organization of Audit Documentation 152
Ownership of Audit Documentation 154
Audit Document Archiving and Retention 154
Key Terms 155
Review Questions 157
Multiple-Choice Questions 157
Problems 159
Discussion Cases 161
Internet Assignments 163
PART III PLANNING THE AUDIT, AND UNDERSTANDING
AND AUDITING INTERNAL CONTROL 165
5 Audit Planning and Types of Audit Tests 166
Client Acceptance and Continuance 168
Prospective Client Acceptance 168
Continuing Client Retention 170
Establishing the Terms of the Engagement 170
The Engagement Letter 170
Internal Auditors 170
The Audit Committee 175
Preplanning 176
Determine the Audit Engagement Team Requirements 176
Assess Independence 176
Assess Risks and Establish Materiality 177
Planning the Audit 177
Assess a Preliminary Level for Control Risk by Account
and Assertion 178
Assess the Possibility of Illegal Acts 178
Identify Related Parties 179
Conduct Preliminary Analytical Procedures 180
Develop an Overall Audit Strategy and Prepare Audit Programs 181
Consider Additional Value-Added Services 182
Types of Audit Tests 183
Risk Assessment Procedures 183
Tests of Controls 183
Substantive Procedures 184
Dual Purpose Tests 185
Substantive Analytical Procedures 185
Analytical Procedures 185
Purposes of Analytical Procedures 185
Substantive Analytical Procedures Decision Process 186
Final Analytical Procedures 198
The Audit Testing Hierarchy 199
An ?Assurance Bucket? Analogy 201
Advanced Module: Selected Financial Ratios 203
Selected Financial Ratios Useful as Analytical
Procedures 203
Short-Term Liquidity Ratios 203
Activity Ratios 204
Profitability Ratios 205
Coverage Ratios 206
Key Terms 206
Review Questions 207
Multiple-Choice Questions 208
Problems 211
Discussion Cases 215
Internet Assignments 217
6 Internal Control in a Financial Statement Audit 218
Introduction 220
Internal Control 220
Definition of Internal Control 220
Controls Relevant to the Audit 220
Components of Internal Control 221
The Effect of Information Technology on Internal Control 222
Planning an Audit Strategy 223
Substantive Strategy 226
Reliance Strategy 226
Obtain an Understanding of Internal Control 228
Overview 228
Control Environment 229
The Entity?s Risk Assessment Process 232
Information Systems and Communication 234
Control Procedures 235
Monitoring of Controls 236
The Effect of Entity Size on Internal Control 237
The Limitations of an Entity?s Internal Control 237
Documenting the Understanding of Internal Control 239
Assessing Control Risk 240
Identifying Specific Controls That Will Be Relied Upon 241
Performing Tests of Controls 241
Concluding on the Achieved Level of Control Risk 242
Documenting the Assessed Level of Control Risk 242
An Example 242
Substantive Procedures 243
Timing of Audit Procedures 244
Interim Tests of Controls 245
Interim Substantive Procedures 245
Auditing Accounting Applications Processed by Service Organizations 246
Communication of Internal Control?Related Matters 247
Advanced Module 1: Types of Controls in an IT Environment 249
General Controls 249
Application Controls 251
Advanced Module 2: Flowcharting Techniques 254
Symbols 254
Organization and Flow 255
Key Terms 256
Review Questions 257
Multiple-Choice Questions 257
Problems 260
Discussion Case 262
Internet Assignments 263
7 Auditing Internal Control over Financial Reporting in
Conjunction with an Audit of Financial Statements 264
Management Responsibilities under Section 404 266
Auditor Responsibilities under Section 404 266
Internal Control over Financial Reporting Defined 267
Internal Control Deficiencies Defined 267
Control Deficiency 267
Significant Deficiency 268
Material Weakness 268
Likelihood and Magnitude 268
Management?s Assessment Process 269
Management?s Documentation 271
Framework Used by Management to Conduct Its Assessment 272
Performing an Audit of Internal Control over Financial Reporting 272
The Audit Process 272
Planning the Engagement 273
Evaluating Management?s Assessment Process 273
Obtaining an Understanding of Internal Control
over Financial Reporting 274
Evaluting Design Effectiveness of Controls 279
Testing and Evaluating Operating Effectiveness of Controls 279
Forming an Opinion on the Effectiveness of Internal Control
over Financial Reporting 284
Written Representations 286
Auditor Documentation Requirements 286
Reporting on Internal Control over Financial Reporting 287
Management?s Report 287
The Auditor?s Report 288
Additional Required Communications in an Audit
of Internal Control over Financial Reporting 294
Integrating the Audits of Internal Control and Financial
Statements 295
Effect of the Audit of Internal Control on the Financial
Statement Audit 295
Effect of the Financial Statement Audit on the Audit
of Internal Control 296
Advanced Module 1: Special Considerations for an Audit
of Internal Control 297
Using the Work of Others 297
Testing Internal Control When a Company Has Multiple
Locations or Business Units 299
Use of Service Organizations 301
Safeguarding of Assets 303
Advanced Module 2: Computer-Assisted Audit Techniques 303
Generalized Audit Software 304
Custom Audit Software 305
Test Data 305
Key Terms 306
Review Questions 307
Multiple-Choice Questions 308
Problems 310
Internet Assignments 315
PART IV STATISTICAL AND NONSTATISTICAL SAMPLING
TOOLS FOR AUDITING 317
8 Audit Sampling: An Overview and Application
to Tests of Controls 318
Introduction 320
Definitions and Key Concepts 322
Audit Sampling 322
Sampling Risk 322
Confidence Level 323
Tolerable and Expected Error 324
Audit Evidence Choices That Do and Do Not Involve Sampling 324
Types of Audit Sampling 326
Nonstatistical versus Statistical Sampling 326
Types of Statistical Sampling Techniques 327
Attribute Sampling Applied to Tests of Controls 328
Planning 328
Population Size 334
Performance 334
Sample Selection 334
Evaluation 337
An Example of an Attribute-Sampling Plan 339
Determine the Test Objective (Step 1) 339
Define the Population Characteristics (Step 2) 339
Determine the Sample Size (Step 3) 340
Select Sample Items (Step 4) 342
Perform the Audit Procedures (Step 5) 343
Calculate the Sample Deviation and the Computed Upper Deviation
Rates (Step 6) 346
Draw Final Conclusions (Step 7) 347
Nonstatistical Sampling for Tests of Controls 349
Determining the Sample Size 349
Selecting the Sample Items 350
Calculating the Computed Upper Deviation Rate 350
Advanced Module: Considering the Effect of the Population Size 351
Key Terms 352
Review Questions 353
Multiple-Choice Questions 353
Problems 356
Discussion Case 359
9 Audit Sampling: An Application to Substantive Tests
of Account Balances 362
Sampling for Substantive Tests of Details of Account Balances 364
Monetary-Unit Sampling 365
Advantages 366
Disadvantages 366
Applying Monetary-Unit Sampling 367
Planning 367
Computing Sample Sizes Using the Attribute-Sampling Tables 371
Computing Sample Sizes Using ACL 371
Performance 372
Evaluation 374
An Extended Example 374
Basic Precision 375
Misstatements Detected 376

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