Test bank and solution of financial statement auditting environment (2)
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Test bank and solution of financial statement auditting environment (2)
Messier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2) AUDITING ENVIRONMENTAnswers to Review Questions2-1 Auditors can be classified under four types:-1External auditors—Auditors who are referred to as "external" or “independent" because they are not employees of the entity being audited. Audit financial statements for publicly traded and private compa Test bank and solution of financial statement auditting environment (2)nies, partnerships, municipalities, individuals, and other types of entities. May also conduct compliance, operational, and forensic audits for such eTest bank and solution of financial statement auditting environment (2)
ntities-2Internal auditors—Auditors who are employees of individual companies, government agencies, and other entities. Often conduct financial, interMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)ual financial statement audit. Internal auditors also often are involved in assurance and consulting engagements for their entities.-3Government auditors—Auditors employed by federal, state, and local agencies. Government auditors are usually considered to be a type of internal auditor. Conduct audi Test bank and solution of financial statement auditting environment (2)ts of activities, financial transactions, and accounts of the federal government. They also assist Congress by performing special audits, surveys. andTest bank and solution of financial statement auditting environment (2)
investigations. The majority of the audits are compliance and operational audits. May also investigate for fraud in government agencies and other orgMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2) and investigative services linns. They are specially trained in detecting, investigating, and deterring fraud and white-collar crime.2-2 Examples of compliance audits include (1) internal auditors determining whether corporate rules and policies are being followed by departments within the organiza Test bank and solution of financial statement auditting environment (2)tion, (2) an examination of tax returns of individuals and companies by the Internal Revenue Service for compliance with the tax laws, and (3) an audiTest bank and solution of financial statement auditting environment (2)
t under the Single Audit Act of 1984 to determine whether an entity receiving federal assistance is in compliance with applicable laws and regulationsMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)rocedures for introducing new drugs to the market. (2) internal auditors examining the effectiveness and efficiency of funds being spent on the entity’s computer resources, and (3) a university hiring an external auditor to examine the effectiveness and efficiency of student advisor.- sen ices.Examp Test bank and solution of financial statement auditting environment (2)les of forensic audits include (1) an examination by an external auditor of cash disbursements for payments to unauthorized vendors, (2) assistance byTest bank and solution of financial statement auditting environment (2)
an auditor to a law-enforcement agency in tracing laundered monies by organized criminals, and (3) an independent auditor helping identify hidden assMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)l Education. Thii IS propnecary nuienal solely for authoiứed uistmctof use. X«x authorized fee sale oe distribution in anymanner. This document may not be copied, scanned, duplicated, forwanied. distributed, or posted on a website. in whole or part.Chapter 02 ■ The Financial Statement Auditing Envir Test bank and solution of financial statement auditting environment (2)onmenttype of audit.2-3 During the laic 1990s and early 2000s. accounting firms aggressively sought opportunities to expand then business in nonauditTest bank and solution of financial statement auditting environment (2)
services such as consulting. Illis expansion from then core audit practice, combined with allegations of auditors refusing to challenge management's aMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)d many others caused investors lo doubt the fundamental integrity of the financial reporting system. Under pressure to restore the public’s confidence. Congress passed the Sarbanes-Oxley Act and created the PCAOB in 2002.2-4 The accounting profession's expansion into new areas, combined with changes Test bank and solution of financial statement auditting environment (2) in the overall business environment, resulted in new regulations and guidelines. The scandals of the late 1990s and early 2000s brought into questionTest bank and solution of financial statement auditting environment (2)
the profession’s ability to sclf-rcgulatc. resulting in new legislation. While these changes have caused pain and turmoil, they highlight the essentiMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)effective financial statement audits, will likely prove healthy for the U.S. financial44959©2017 by McCraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in anymanner. Thú document may not be copied, icanned. duplicated, for Test bank and solution of financial statement auditting environment (2)v.urded. distributed. or posted on a website. in v.'hole or par..Chapter 02 • The Financial Statement Auditing Environmentreporting system and tor theTest bank and solution of financial statement auditting environment (2)
profession. Further, somewhat ironically, the SOX-mandated audit of internal control over financial reporting has brought significant new revenues toMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)n accordance with established accounting standards. Note that the auditor’s opinion explicitly states that the financial statements are the responsibility of management. The auditor is responsible to issue an opinion in regards to the financial statements prepared by management. In order to issue th Test bank and solution of financial statement auditting environment (2)is opinion, the auditor must plan and perform the audit in accordance with established standards to obtain reasonable assurance that the financial staTest bank and solution of financial statement auditting environment (2)
tements are free of material misstatement, whether caused by eiTor or fraud. However, it is important to note that an auditor's unqualified opinion doMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)al components of the high-level model of business offered in the chapter are: corporate governance, objectives, strategies, processes, controls, transactions, and financial statements. Corporate governance is carried out by management and the board of dữectors in order to ensure that business object Test bank and solution of financial statement auditting environment (2)ives are carried out and that companyassets are safeguarded. To achieve its objectives, management must formulate strategies and implement various proTest bank and solution of financial statement auditting environment (2)
cesses which are in turn carried out through business transactions. The entity's information and internal control systems must be designed to ensure tMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)tor obtain a firm understanding of these components in order to understand relevant risks and to plan the nature, timing, and extent of the audit so that it is efficient and effective.2-7 The information system must maintain a record of all businesses transactions. It should be capable of producing Test bank and solution of financial statement auditting environment (2)accurate financial reports to summarize the effects of the entity’s transactions. Among other things, internal control is required to ensure that a prTest bank and solution of financial statement auditting environment (2)
oper environment is established and that transactions are appropriately conducted and recorded by the information system and company employees. EffectMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENT Test bank and solution of financial statement auditting environment (2)ffectiveness and efficiency of operations. Auditing standards require that the auditor obtain an understanding of the client's environment, including its internal control, in planning the nature, timing, and extent of testing.2-8 The AICPA issues the following standards:•Statements on Auditing Stand Test bank and solution of financial statement auditting environment (2)ards•Statements on Standards for Attestation Engagements•Statements on Standards for Accounting and Review Sen icesMessier_10eSM_CH_2.pdfMessier_10e_IM_CH_2.pdfIPPTChap002.pdfChapter 02 • The Financial Statement Auditing EnvironmentCHAPTER 2THE FINANCIAL STATEMENTGọi ngay
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