AUDITING: A RISK-BASED APPROACH

AUDITING: A RISK-BASED APPROACH

12e ||ZEHMS, GRAMLING, RITTENBERG|| Solutions for Chapter 1 Solutions Manual Reconciliation from 11e to 12e Question # for 11e Deleted/replaced/updated/new? Question # for 12e

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question about regulatory enforcement 2

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question to one specifically focused on the Theranos fraud.8

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10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 Updated to reflect 2021 IESB Code of Ethics.22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 Auditing A Risk Based-Approach, 12e Karla Zehms, Audrey Gramling, Larry Rittenberg (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) All Chapters/ Supplement files download link at the end of this file..

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30 30 40 Changed order of learning objectives; same question 31 41 Changed order of learning objectives; same question 32 42 Changed order of learning objectives; same question 33 31 34 32 Updated – added additional content on poor judgments as documented in a PCAOB enforcement release 35 33 36 34 37 35 38 36 39 37 40 38 41 39 42 New fraud case about Elizabeth Holmes & Theranos 43 43 44 44 45 45 46 46 47 47 48 48 49 49 50 50 Updated to a 2021 PCAOB enforcement case illustrating the same points.51 New case investigating the outcome of the Holmes/Theranos trial.52 New case simulation on data analytics and CPA exam written communication.53 .

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51 Deleted Academic Research case; eliminating this feature.

52 Deleted Academic Research case; eliminating this feature.

Answers to Check Your Basic Knowledge Questions 1-1 T 1-2 F 1-3 d 1-4 b 1-5 T 1-6 F 1-7 a 1-8 b 1-9 T

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1-23 b 1-24 a Review Questions and Short Cases 1-1 The objective of external auditing is to provide opinions on the reliability of the financial statements and, as part of an integrated audit, provide opinions on internal control effectiveness.The value of the external auditing profession is affirmed when the public has confidence in its objectivity and the accuracy of its opinions. The capital markets depend on accurate, reliable, and objective (neutral) data that portray the economic nature of an entity’s business and in turn .

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provide a base to judge current progress toward long-term objectives. If the market does not receive reliable data, investors lose confidence in the system, make poor decisions, and may lose a great deal of money; ultimately, the system may fail. By providing an independent audit opinion, the capital markets have assurance that the financial data that they are basing their decisions on are accurate.

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The economy benefits from regulatory enforcement because people know that the government is devoting resources to protecting them, which makes people more likely to invest with confidence. By investing with confidence, investors make capital available to companies who can use that capital in profitable ways that benefit the entire society through products/services, jobs, and taxes. The economy benefits from the auditing profession because the assurance that audits provide also makes people more likely to invest with confidence.

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Audit services are demanded because there is:

● Potential bias in providing information ● Remoteness between a user and the organization or trading partner ● Such complexity in the transaction, information, or processing systems that it is difficult to determine their proper presentation without a review by an independent expert ● Need to limit negative consequences that arise from relying on inaccurate information

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The audit enhances the quality of financial statements because the user has assurance that an independent, qualified professional has examined the financial statements and has rendered an opinion on their fairness. The independence and expertise of the auditor serve as a quality control function to overcome the potential bias of management in presenting the financial statements in a manner that most flatters an assessment of their performance. The audit is designed to add credibility to the financial statements.

An audit does not necessarily guarantee a fair presentation of a company's financial statements, although it does increase the likelihood that there are no material misstatements in the company's financial statements. The audit provides reasonable, but not absolute, assurance about the accuracy of the financial statements. The caveats about fairness exist for two reasons:

● Fairness is judged within the applicable financial reporting framework. Some question whether GAAP or IFRS results in the fairest possible presentations in all situations.

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