Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Chapter 1, Problem 10TFQ
To determine
Introduction:An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.
To examine: Whether the given statement is true or false.
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An accounting firm uses partners and staff to produce an audit. The quality of the audit (as measured by reduction in litigation liability and the likelihood of audit errors) is a function of the composition of the audit team. In particular, ?=??.???.?
where r is the audit quality, P is the partner-hours devoted to the audit, and S is the staff-hours devoted to the audit. Notice that both partners and staff are essential for audit quality, and that audit quality increases in the amount of either, but at a decreasing rate.
The cost of a partner-hour is 50 while the cost of a staff-hour is 5. The budget for this audit is 5000. How many partner and staff hours will the accounting firm choose to maximize quality subject to this budget constraint?
Which of the following best describes the relationship between auditing and attestationengagements?a. Auditing is a subset of attestation engagements that focuses on the certification of financial statements.b. Attestation is a subset of auditing that provides lower assurance than that provided by anaudit engagement.c. Auditing is a subset of attestation engagements that focuses on providing clients withadvice and decision support.d. Attestation is a subset of auditing that improves the quality of information or its contextfor decision makers
Describe what is meant by acceptable audit risk. Explain whyeach of the following statements is true:a. A CPA firm should attempt to achieve the same audit risk for all audit clients whencircumstances are similar.b. A CPA firm should decrease acceptable audit risk for audit clients when external usersrely heavily on the statements.c. A CPA firm should decrease acceptable audit risk for audit clients when engagementrisk is high.d. Different CPA firms should attempt to achieve reasonably similar audit risks forclients with similar circumstances
Chapter 1 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 1 - Prob. 1TFQCh. 1 - Prob. 2TFQCh. 1 - Prob. 3TFQCh. 1 - Prob. 4TFQCh. 1 - Prob. 5TFQCh. 1 - Prob. 6TFQCh. 1 - Prob. 7TFQCh. 1 - Prob. 8TFQCh. 1 - Prob. 9TFQCh. 1 - Prob. 10TFQ
Ch. 1 - Prob. 11TFQCh. 1 - Prob. 12TFQCh. 1 - Prob. 13TFQCh. 1 - Prob. 14TFQCh. 1 - Prob. 15MCQCh. 1 - Prob. 16MCQCh. 1 - Prob. 17MCQCh. 1 - Prob. 18MCQCh. 1 - Prob. 19MCQCh. 1 - Prob. 20MCQCh. 1 - Prob. 21MCQCh. 1 - Prob. 22MCQCh. 1 - Prob. 23MCQCh. 1 - Prob. 24MCQCh. 1 - Prob. 25MCQCh. 1 - Prob. 26MCQCh. 1 - Prob. 27MCQCh. 1 - Which of the following factors is an example of a...Ch. 1 - Prob. 29RSCQCh. 1 - Prob. 30RSCQCh. 1 - Prob. 31RSCQCh. 1 - Prob. 32RSCQCh. 1 - Prob. 33RSCQCh. 1 - Prob. 34RSCQCh. 1 - Prob. 35RSCQCh. 1 - Prob. 36RSCQCh. 1 - Prob. 37RSCQCh. 1 - Prob. 38RSCQCh. 1 - Prob. 39RSCQCh. 1 - Prob. 40RSCQCh. 1 - Prob. 41RSCQCh. 1 - Prob. 42RSCQCh. 1 - Prob. 43RSCQCh. 1 - Prob. 44RSCQCh. 1 - Prob. 45RSCQCh. 1 - Prob. 46RSCQCh. 1 - Prob. 47RSCQCh. 1 - Prob. 48RSCQCh. 1 - Prob. 49RSCQCh. 1 - Prob. 50RSCQCh. 1 - Prob. 51RSCQCh. 1 - Prob. 52RSCQCh. 1 - Prob. 53RSCQCh. 1 - Prob. 54FFCh. 1 - Prob. 55FFCh. 1 - Enron and Arthur Andersen UP Enron was an energy...
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- The audit plan is more detailed than the overall audit strategy in that it includes the nature,timing and extent of audit procedures to be performed by engagement team members True or False?arrow_forwardCompliance auditing often extends beyond audits leading to the expression of opinions on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness, as well as: Select one: a. accuracy. b. evaluation. c. adherence to specific rules or procedures d. internal control.arrow_forwardWhat is the relationship between the external auditor and the organization. What steps have been taken to ensure that the relationship is truly neutral and no bias is shown by the external auditing firm?arrow_forward
- As a part of understanding the client's performance measurement system, the auditor focusing on key performance indicators that management uses to measure progress toward its objectives which beyond financial statements figures Select one: True or Faisearrow_forwardAn examination of part of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit Select one: a. compliance audit b. operational audit c. financial statement audit d. production auditarrow_forwardWhich of the following best describes the relationship between auditing and attestation engagements Select one: a. Auditing is a subset of attestation engagements that focuses on providing clients with advice and decision support. b. Attestation is a subset of auditing that provides lower assurance than that provided by an audit engagement. c. Auditing is a subset of attestation engagements that focuses on the certification of financial statements. d. Attestation is a subset of auditing that improves the quality of information or its context for decision makersarrow_forward
- What are the objectives of an audit risk assessment? Explain why a risk assessment performed during audit planning sets the tone for the entire audit engagement. Also comment on how the concept of ‘risk assessment’ might be useful for any accountant at the outset of any assignment, including non-audit work.arrow_forward1. Why is audit firm culture important in ensuring that individual audit engagement partners resolve adjustments in a quality manner? 2. Why should the auditor ordinarily disclaim an opinion if the client imposes significant scope limitations on the audit procedures?arrow_forwardAudit morality includes moral sensitivity, moral judgment, moral motivation, and moral character. Explain how audit morality plays a key role in determining best audit practices that influence audit performance.arrow_forward
- The execution stage of an audit involves: evaluating the results of the detailed testing and forming an opinion on the truth and fairness of the client's financial report the assessment of the audit firm's quality control procedures the performance of detailed tests of controls and substantive testing of transactions and accounts gaining an understanding of the clientarrow_forwardThe Responsibilities principle requires that auditors be responsiblefor having appropriate competence and capabilities to perform the audit. What are thevarious ways in which auditors can fulfill this principle?arrow_forwardWhich of the following statements is incorrect? Select one : a. Internal auditors provide assurance on the organization's governance , risk management and internal control processes . b. Communicating engagement outcomes is a critical component of all internal assurance and consulting engagements . c. Obtaining an a detailed understanding of the auditee is an important performing step. d. Independence refers to the organizational status of the Internal Audit function , whereas objectivity refers to the attitude of individual internal auditors .arrow_forward
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