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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How has the Sarbanes–Oxley Act attempted to ensure that external auditors will be completely independent in the future?
The Information Systems Audit and Control Association (ISACA) developed guidelines and procedures on how to follow the standards that apply specifically to the specialized nature of the IS Audit. The guidelines serve as guidance the IS auditor should normally follow. However, there may be situations where the auditor will not follow that guidance. In this case, what happens now to the work done by the IS auditor?
What are the most important concerns facing the world now. The auditors' obligations in terms of analyzing the risks and uncertainties associated with a continuing concern are as follows:
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- Refer to Exhibit 2.5 and answer the following questions. a. (Sections 101, 104, and 105) How does the establishment and operation of the PCAOB help to ensure quality external audits? How will audit firm inspections and investigations by the PCAOB help ensure high audit quality? b. (Sections 201-203) How do Sections 201-203 address audit ()r independence concerns? c. (Section 206) What is a cooling-off period, and how does it address auditor independence concerns? d. (Section 301) How do the audit committee requirements help ensure effective corporate governance? e. (Sections 302 and 906) How do the officer certification requirements help to address the risk of fraud in publicly traded organizations? What is the likelihood that a CFO who is committing fraudulent financial reporting would sign the certification falsely, and what are your reactions to that possibility? f. (Section 401) How does this section relate to the Enron fraud? g. (Section 404) How do the management assessment and audit or attestation of internal controls contained in this section help to address the risk of fraud in publicly traded organizations? h. (Section 407) Why is it important that at least one member of the audit committee be a financial expert? What are the financial reporting implications if the audit committee does not have any individuals serving on it who possess financial expertise? i. (Section 802) How does this section relate to the Enron fraud?arrow_forwardDescribe the major changes to the Auditor's Report as recommended by ASB (Auditing Standards Board ) of AICPA? Critically analyze the impact of these changes on auditors.arrow_forwardThe creation of the PCAOB by the Sarbanes–Oxley Act has affected both the standards-setting process and the periodic review of the quality ofan audit firm’s work.Required:a. Identify the responsibilities of the AICPA, PCAOB, and SEC in the auditing standards-setting process.b. Which standard(s) provide guidance for the audits of public entities? Which standard(s) provide guidance for the audits of nonpublic entities?c. What role do the AICPA and PCAOB play in the periodic review of the quality of audit firms’ work?arrow_forward
- The Audit Expectation Gap A significant number of the concepts and processes we examined during the unit raised concerns around the audit expectation gap (see Porter, 1993). In a 2018 discussion series, KPMG focused on the need for better communication by auditors with stakeholders and users as being an important component in reducing the scope of the expectation gap. In their report, KPMG (2018) stated: 'Better and more communication about what matters to our stakeholders is one of the ways in which the audit profession can improve its relevance and restore trust'. Required: Critically evaluate the role of 'better and more communication' in reducing the scope of the expectation gap. In your answer, you may wish to think about the role of communication in relation to the three components of the expectations gap discussed by Porter (1993), including deficient performance, deficient standards and unreasonable expectations.arrow_forwardWhich of the following expressions best describes a situation under which the issuance of a report that concludes on the condition of the internal controls of an organization that provides technological services to one of our audit clients (SOC report) is required? It is that situation in which a CPA has been hired to evaluate a. the projected financial statements prepared by the client, to see if the expected results comply with hypothetical assumptions or not. b. the information systems and technologies subcontracted by the client, specifically in what corresponds to criteria of security, availability, integrity, confidentiality and privacy. c. any assertion or area that the client has asked to intervene (subject matter), and do so in accordance with compliance or not, with criteria or principles (against criteria). d. services that help the client maintain their financial independence.arrow_forwardWhat are the auditor’s responsibilities to communicate information to the audit committee under PCAOB standards? If the auditor discovers that the audit committee routinely ignores such communications especially when they are critical of management’s use of GAAP in the financial statements, what step(s) might the auditor take at this point?arrow_forward
- Why is the Auditing Standards Board’s set of management assertions important to auditors? Dothese assertions differ from those included in PCAOB standards? If so, how are they different?arrow_forwardWhat possible actions would an auditor might take if a client’s financial statements depart from GAAP. Would the demand for assurance services increase or decrease in the future?arrow_forwardWhy do we consider risk assessment the foundation of the internal audit function? To safeguard independence, many internal audit departments continue to perform risk assessments in a silo, without collaborating with and leveraging the work of ERM. Do you agree with this approach?arrow_forward
- How does the role of the SEC differ from that of the AICPA? Contrast the roles of the AICPA and the PCAOB in the development of auditing standards.arrow_forwardExplain one way the external auditor's responsibilities regarding a public company's system of internal controls have changed since SAS 78 became effective in the late 1990s. Were these changes necessary? Do you believe the changes have been effective at reducing risk for the company and the users of the financial statements? Explain your rationale.arrow_forwardTrue or False The reported information shall reflect positive and negative aspects of the reporting organization’s performance to enable a reasoned assessment of overall performance. * CFO and the audit committee depend heavily on one another * Included in the Environment disclosures are the risks and opportunities due to climate change, procurement practices with respect to local suppliers, and anti-corruption *arrow_forward
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