Solution Manual for Auditing and Assurance Services, 16th Edition
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Chapter 1
The Demand for Audit and Other Assurance Services
Concept Checks
P. 8
1. To do an audit, there must be information in a verifiable form and some
standards (criteria) by which the auditor can evaluate the information.
Determining the degree of correspondence between information and
established criteria is determining whether a given set of information is in
accordance with the established criteria. For an audit of a company’s
financial statements the criteria are U.S. generally accepted accounting
principles or International Financial Reporting Standards.
2. The four primary causes of information risk are remoteness of information,
biases and motives of the provider, voluminous data, and the existence of
complex exchange transactions.
The three main ways to reduce information risk are:
1. User verifies the information.
2. User shares the information risk with management.
3. Audited financial statements are provided.
P. 17
1. The three main types of audits are operational audits, compliance audits, and
financial statement audits. The table below summarizes the purposes and
nature of each type of audit.
OPERATIONAL
AUDITS
COMPLIANCE
AUDITS
AUDITS OF
FINANCIAL
STATEMENTS
PURPOSE To evaluate
whether
operating
procedures are
efficient and
effective
To determine
whether the client is
following specific
procedures set by a
higher authority
To determine
whether the
overall financial
statements are
presented in
accordance with
specified criteria
(usually GAAP)
Chapter 1
The Demand for Audit and Other Assurance Services
Concept Checks
P. 8
1. To do an audit, there must be information in a verifiable form and some
standards (criteria) by which the auditor can evaluate the information.
Determining the degree of correspondence between information and
established criteria is determining whether a given set of information is in
accordance with the established criteria. For an audit of a company’s
financial statements the criteria are U.S. generally accepted accounting
principles or International Financial Reporting Standards.
2. The four primary causes of information risk are remoteness of information,
biases and motives of the provider, voluminous data, and the existence of
complex exchange transactions.
The three main ways to reduce information risk are:
1. User verifies the information.
2. User shares the information risk with management.
3. Audited financial statements are provided.
P. 17
1. The three main types of audits are operational audits, compliance audits, and
financial statement audits. The table below summarizes the purposes and
nature of each type of audit.
OPERATIONAL
AUDITS
COMPLIANCE
AUDITS
AUDITS OF
FINANCIAL
STATEMENTS
PURPOSE To evaluate
whether
operating
procedures are
efficient and
effective
To determine
whether the client is
following specific
procedures set by a
higher authority
To determine
whether the
overall financial
statements are
presented in
accordance with
specified criteria
(usually GAAP)
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Subject
Auditing