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Modern Modern Auditing: Modern Modern Auditing: Auditing: Auditing: Assurance Assurance Services Assurance Services and and the
Modern
Modern Auditing:
Modern
Modern Auditing:
Auditing:
Auditing:
Assurance
Assurance Services
Assurance
Services and
and the
the Integrity
Assurance Services
Services and
and the
the Integrity
Integrity
Integrity
of
of Financial
of
of Financial
Financial Reporting,
Financial Reporting,
Reporting, 88
Reporting, 88
thth thth
Edition
Edition
Edition
Edition
William
William C.
C. Boynton
Boynton
California
California Polytechnic
Polytechnic State
State
University
University atat San
San Luis
Luis Obispo
Obispo
Raymond
Raymond N.
N. Johnson
Johnson
Portland
Portland State
State University
University
Chapter 1 – Auditing and the Public Accounting

Profession – Integrity of Financial Reporting

Chapter 11 Overview

Chapter 11

Overview

Overview

Overview

Chapter

Chapter

Chapter 1 1 Overview Chapter 1 1 Overview Overview Overview Chapter Chapter

Auditing Defined

Auditing Defined

Auditing

Auditing

Defined

Defined

Systematic process

Objectively obtaining and evaluating evidence

Assertions about economic actions and events

Degree of correspondence

Auditing Defined

Auditing Defined

Defined (cont.)

Defined (cont.)

Auditing

Auditing

(cont.)

(cont.)

Established criteria

Communicating the results

Interested users

Comparative Summary

Comparative Summary

Comparative

Comparative

Summary of

Summary of

of Audits

of Audits

of Types

of Types

Audits

Audits

Types

Types

of

of

Comparative Summary Comparative Summary Comparative Comparative Summary of Summary of of Audits of Audits of Types

of Auditors

of Auditors

Types of

Types of

Auditors

Auditors

Types

Types

Independent Auditors

Internal Auditors

Government Auditors

Assurance Services

Assurance Services

Services Defined

Services Defined

Assurance

Assurance

Defined

Defined

Independence

Professional services

Quality of information

Decision maker

Example Assurance

Example Assurance

Assurance Services

Assurance Services

Example

Example

Services

Services

Audit Engagements Attest Services

Examination Review Engagement Agreed-upon Procedures Engagement

Accounting Services Compilation Services

of Assurance

of Assurance

Assurance

Assurance

Levels of

Levels of

Levels

Levels

Reasonable Assurance

Negative Assurance

Agreed-upon Procedures

Compilation Without Assurance

Assurance Services

Assurance Services

of Assurance

of Assurance

Universe of

Universe of

Universe

Universe

Services

Services

Assurance Services Assurance Services of Assurance of Assurance Universe of Universe of Universe Universe Services Services

Accountant’s Value

Accountant’s Value

The Accountant’s

The Accountant’s

Value Chain

Value Chain

Chain

Chain

The

The

Accountant’s Value Accountant’s Value The Accountant’s The Accountant’s Value Chain Value Chain Chain Chain The The

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  • 1. This type of audit involves obtaining and evaluating evidence about the efficiency and effectiveness of an entity’s operating activities.

A. Financial Statement Audit

  • B. Compliance Audit

  • C. Operational Audit

  • D. Internal Control Audit

  • C. Operational Audit

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2. These auditors are typically CPA’s

who render professional auditing

services to clients.

A. Independent Auditors

  • B. Internal Auditors

  • C. Government Auditors

  • D. IRS Auditors

A. Independent Auditors

of Auditing

of Auditing

The Roots

The Roots

Auditing

Auditing

Roots of

Roots of

The

The

British influence and migration

Stock market crash

Legislation of the 1930’s

Important changes in the 1940’s

of Auditing

of Auditing

The Roots

The Roots

Auditing

Auditing

Roots of

Roots of

The

The

Scrutiny of 1980’s lead to changes

Increasing amount of consulting in

1990’s

Growing numbers of earnings restatements

Sarbanes-Oxley Act of 2002

Financial Statement

Financial Statement

for Financial

for Financial

Statement

Statement

Need for

Need for

Audits

Audits

Audits

Audits

Need

Need

Conflict of Interest

Consequence

Complexity

Remoteness

Economic Benefits

Economic Benefits

of anan Audit

of anan Audit

Benefits of

Benefits of

Economic

Economic

Audit

Audit

Access to Capital Markets Lower Cost of Capital Deterrent to Inefficiency and Fraud Control and Operational Improvements

Statement Audit

Statement Audit

Limitations of

Limitations of

of aa Financial

of aa Financial

Limitations

Limitations

Statement

Statement

Financial

Financial

Audit

Audit

Economic Limitations

Reasonable Cost Reasonable Length of Time

Accounting Framework Limitations

Alternative Accounting Principles Accounting Estimates

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  • 3. Which of the following is not an economic benefit of a financial statement audit?

A. Access to Capital Markets

  • B. Lower Cost of Capital

  • C. Control and Operational Improvements

  • D. Maintain Fair Competition

  • D. Maintain Fair Competition

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4. Which of the following is not an

inherent limitation of a financial

statement audit?

A. Reasonable Cost

  • B. Unlimited Timeframe

  • C. Alternative Accounting Principles

  • D. Accounting Estimates

  • B. Unlimited Timeframe

Organizations

the

the

with

with

the Public

the Public

Profession

Profession

Organizations Associated

Organizations

Associated with

Associated with

Public Accounting

Public Accounting

Accounting Profession

Accounting Profession

Organizations Associated

Organizations the the with with the Public the Public Profession Profession Organizations Associated Organizations Associated with

Regulatory Framework

Regulatory Framework

Ensuring High-Quality

Ensuring High-Quality

High-Quality Services

High-Quality Services

Framework for

Framework for

Regulatory

Regulatory

Ensuring

Ensuring

Services

Services

for

for

Standard Setting

Firm Regulation

Inspection and Peer Review

Government Regulation

Standard-Setting Organizations

Standard-Setting Organizations

Standard-Setting

Standard-Setting

Organizations

Organizations

United States

United States

the United

the United

States

States

inin the

inin the

Standard-Setting Organizations Standard-Setting Organizations Standard-Setting Standard-Setting Organizations Organizations United States United States the United the United

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5. Which organization is considered to

be a private sector organization?

A. State Boards of Accountancy

  • B. Securities and Exchange Commission

  • C. AICPA

  • D. IRS

  • C. AICPA

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  • 6. This component of regulatory framework includes the inspection of audits by the PCAOB staff and peers in other accounting firms.

A. Standard setting

  • B. Firm regulation

  • C. Inspection and peer review

  • D. Government regulation

  • C. Inspection and peer review