Premium Essay

Audit Chapter 8 Solutions Manual

In: Business and Management

Submitted By satuliphin
Words 11678
Pages 47
Solutions for Chapter 8

Tools to Gather Audit Evidence

Review Questions:

8-1. The three main tools the auditor might use in gathering and evaluating audit evidence are:

• Audit sampling • Generalized Audit Software • Analytical procedures

8-2. Non-sampling risk is the risk that the auditor makes an improper assessment of inherent and/or control risk or did not apply audit procedures carefully. It can be minimized through: (1) Good hiring, training and supervision practices; and (2) Careful and knowledgeable review of audit documentation and audit procedures.

Sampling risk is the risk that the misstatement projections based on the sample results lead to the wrong conclusion about the population because of a non-representative sample. Sampling risk can be reduced by increasing the sample size – to the extreme of auditing the entire population therefore eliminating sampling risk altogether.

8-3. Factors to consider when choosing between statistical and nonstatistical sampling include: • Need to quantify and control sampling risks. • Additional cost of designing, selecting, and evaluating a statistical sample. • Availability of computer software to assist in designing, selecting, and/or evaluating the sample. • Ability of the audit staff to properly implement statistical sampling.

8-4. a. Tolerable deviation rate depends on the significance of the control procedure being tested and the degree of reliance the auditor wishes to place on it. The auditor, in essence, considers the effect of the failure on potential material misstatements in the financial statements. The tolerable failure rate is the rate beyond which the failure of an important control procedure could lead to material misstatements in the financial statements.

b. Expected failure rate is

Similar Documents

Premium Essay

Intermediate Financial Accounting Chapter 1 Solution

...Chapter 1 Environment and Theoretical Structure of Financial Accounting AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments, and faculty may approach assessment and its documentation differently, one approach is to provide specific questions on exams that become the basis for assessment. To aid faculty in this endeavor, we have labeled each question, exercise and problem in Intermediate Accounting, 7e with the following AACSB learning skills: Questions 1–1 1–2 1–3 1–4 1–5 1–6 1–7 1–8 1–9 1–10 1–11 1–12 1–13 1–14 1–15 1–16 1–17 1–18 1–19 1–20 1–21 1–22 1–23 1–24 1–25 1–26 1–27 1–28 1–29 AACSB Tags Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking Reflective thinking 1–30 1–31 1–32 Reflective thinking Reflective thinking Reflective thinking Brief Exercises 1–1 1–2 1–3 1–4 1–5 1–6 AACSB Tags Analytic Reflective thinking Reflective thinking Reflective thinking...

Words: 7572 - Pages: 31

Premium Essay

Case Application Pinnacle Manufacturing

...Manufacturing Solution Manual If you are looking for a ebook Pinnacle manufacturing solution manual gxukzaf in pdf format then you've come to the right website. We presented the full version of this ebook in pdf and epub formats. You can read Pinnacle manufacturing solution manual online gxukzaf or download to your computer. In addition to this ebook, on our site you can read the instructions and other art books online, or download them as well. We want to draw your attention that our site does not store the book itself, but we give link to the site where you can download or read online. So if you need to download Pinnacle manufacturing solution manual pdf gxukzaf then you've come to the right website. We have Pinnacle manufacturing solution manual epub, pdf and kindle formats. We will be happy if you come back to us again. Auditing pinnacle case answers - free eBooks Auditing pinnacle case answers download on Caa2011-2.org free books and manuals search Banbury Impex Case Study http://www.caa2011-2.org/auditing-pinnacle-case-answers/ Pinnacle manufacturing auditing case solution Pinnacle manufacturing auditing case solution download on iubmb-2013-3.org free books and manuals search - CHAPTER 8 8 40 PINNACLE MANUFACTURING SOLUTION http://www.iubmb-2013-3.org/pinnacle-manufacturing-auditing-case-solution/ Pinnacle manufacturing case solution - free Pinnacle manufacturing case solution download on iubmb-2013-3.org free books and manuals search - TIVO HARVARD CASE SOLUTION http://www...

Words: 940 - Pages: 4

Premium Essay

Internal Control

...CHAPTER 3 Auditors’ Ethical and Legal Responsibilities SOLUTIONS FOR REVIEW CHECKPOINTS 3.1 This arises from the three party accountability discussed in chapter 1. The auditor is hired because users expect there may be such a conflict. If users completely trusted management there would be no need to have an auditor. This is the only way to detect fraudulent or misleading reporting. The logic is to reduce this potential to an acceptable level of risk. If the auditor assumed this risk was zero to start with the auditor would not need to provide evidence that the possibility is low, and that contradicts the reason users demand an audit. 3-2 No, the auditor cannot detect deception without being skeptical. A non-skeptical auditor on finding evidence of fraud may not treat it with the significance it deserves. The rule that suspicious transactions or evidence of management deceit should automatically be considered material, even when the absolute amounts involved may be very small or insignificant, is an example of skeptical logic in action. Since three party accountability implies some degree of mistrust of management by users, the auditor must incorporate skepticism in his or her reasoning process when management makes assertions about the financial statements it has prepared. 3-3 A professional accountant must be prepared to be agent, spectator, advisor, instructor, judge, critic. 3-4 Apparently, in ethical philosophy, the word "conscience" is used...

Words: 5626 - Pages: 23

Premium Essay

Cloud Computing

...Compliments of on IBM Limited Editi ose, Consolidate Cl & Report Learn to: • Distinguish between the closing, consolidating, and financial reporting processes • Use integration and automation to ensure data integrity and streamline CCR activities • Identify the right CCR solution for your organization Maire Loughran These materials are the copyright of Wiley Publishing, Inc. and any dissemination, distribution, or unauthorized use is strictly prohibited. Close, Consolidate & Report FOR DUMmIES by Maire Loughran ‰ IBM LIMITED EDITION These materials are the copyright of Wiley Publishing, Inc. and any dissemination, distribution, or unauthorized use is strictly prohibited. Close, Consolidate & Report For Dummies® IBM Limited Edition , Published by Wiley Publishing, Inc. 111 River Street Hoboken, NJ 07030-5774 www.wiley.com Copyright © 2011 by Wiley Publishing, Inc., Indianapolis, Indiana Published by Wiley Publishing, Inc., Indianapolis, Indiana No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online...

Words: 5922 - Pages: 24

Premium Essay

Solution

...20 Solutions Manual for Taxation for Decision Makers Solutions to Chapter 2 Problem Assignments Check Your Understanding 1. Tax Planning vs. Compliance Distinguish tax planning from tax compliance. Solution: Tax compliance involves the gathering of relevant information, evaluating and classifying that information, filing tax returns, and representing clients at Internal Revenue Service audits. Tax planning is the process of evaluating the tax consequences associated with a transaction and making recommendations to achieve the desired objective at minimal tax cost. It generally involves extensive tax research. 2. Tax vs. Nontax Factors For each of the following independent situations, identify whether the item would be primarily a tax or a nontax factor in performing tax planning. a. The taxpayer lost a quarter of her net worth when the dot-com bubble burst and does not want to own any investments with risk such as stock. b. The taxpayer hates to pay any federal income taxes and would rather pay an equal amount of money to an accountant or attorney than pay taxes to the federal government. c. The taxpayer has a large capital loss carryforward from last year. Solution: a. This is primarily a nontax factor situation. The taxpayer has specified that he or she is risk averse, a personal choice, due to having experienced prior losses. b. The taxpayer’s dislike of paying taxes is really a nontax factor; this dislike, however, leads him to seek income tax advice to reduce taxes and...

Words: 9117 - Pages: 37

Premium Essay

Adms

... Fall 2013 Course Outline AP/ADMS 4552 3.0 Section A and B Information Systems Audit Term: Fall 2013 COURSE: AP/ADMS 4552 3.0 Sections A and B Information Systems Audit Schedule First day of class: Section A: Wednesday, September 11, 2013 11:30 AM – 2:30 PM, Location: HNE 030 Section B: Thursday, September 12, 2013 7:00 PM – 10:00 PM, Location: HNE 032 REQUIRED COURSE TEXT/READINGS: • Hall, James A., (2011), Information Technology Auditing, 3e, Mason: South-Western Cengage Learning (Referred to as “IT Audit Text” in the Readings List for each class) • Additional material as listed in the course outline. This includes articles referenced by links, readings from books that were required for prerequisite courses, cases and assignment details posted on our web site. • CICA Assurance Handbook, as available online from York University library, (referred to as “Handbook” in the Readings List for each class). Selected readings are from: [Note this book is available on reserve at the business library in the Schulich building if you do not have a copy.] • Arens, A., R. J. Elder, M. S. Beasley and I. B. Splettstoesser-Hogeterp. 2011. Auditing: The Art and Science of Assurance Engagements, Canadian 11th Edition, Pearson Prentice Hall: Toronto. (Referred to as “Audit Text” in the Readings List) References for the 12th Canadian edition of the Audit text (as an alternative to the 11th edition) will be provided separately as a document...

Words: 3433 - Pages: 14

Premium Essay

Audit

...above texts are published by Prentice Hall and are available as a bundled package. Prerequisites Computer Resources: Course Objectives: This course is designed to provide you with an understanding of professional auditing as practiced in the United States. Our discussions will focus on various aspects of the auditing profession. Successful completion of this course will provide you with a basic understanding of: * The auditor's consideration of financial statement cycles, * The evaluation of audit evidence, and * The issues related to completing an audit. Honor Code: Each student is expected to behave in a manner that brings honor to himself or herself, to the student body, and to the university community. In keeping with this expectation, students should be familiar with requirements of the Honor System Constitution. All class assignments are expected to be your original work. You are not permitted to use solutions manuals, solutions from prior semester materials, or another student’s materials in completing assignments. All university policies regarding cheating, plagiarism, falsification, nonattendance, and illnesses will be strictly applied and enforced in this course. The Honor Code will be strictly enforced in this course and all aspects of your coursework are covered by Honor System. All assignments submitted to the instructor shall be...

Words: 1594 - Pages: 7

Premium Essay

Auditing

...CHAPTER 2 OVERVIEW OF AUDITING I. Review Questions 1. One definition of auditing is that it is a systematic process by which a competent, independent person objectively obtains and evaluates evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users. The Philippine Standards on Auditing (PSA) 120 “Framework of Philippine Standards on Auditing” states the objective of an audit as follows: “The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared in all material respects, in accordance with an identified financial reporting framework.” 2. This apparent paradox arises from the distinction between the function of auditing and the function of accounting. The accounting function is the process of recording, classifying and summarizing economic events to provide relevant information to decision makers. The rules of accounting are the criteria used by the auditor for evaluating the presentation of economic events for financial statements and he or she must therefore have an understanding of generally accepted accounting principles (GAAP), as well as generally accepted auditing standards (GAAS). The accountant need not, and frequently does not, understand what auditors do, unless he or she is involved in doing audits, or has been trained...

Words: 2252 - Pages: 10

Premium Essay

Paper

...Claudine Perez ACC 340 Final Examination 1. The essential steps in performing a systems study are (in order of occurrence): a) Analysis, design, implementation and initial operation, follow-up b) Design, planning, follow-up, analysis, and implementation c) Planning, system specification, analysis, production, implementation d) Planning, analysis, design, implementation, and follow-up 2. Which of the following is intended to solve the problem that financial data used in one application is not easily transferable to other applications? a) XMP b) ERP c) XBRL d) XMLP 3. Information systems auditors are: a) Auditors who are concerned with analyzing risks associated with computerized information systems b) Individuals who often work closely with financial auditors c) Auditors who have a lot of technical expertise related to information technology d) all of the above 4. Which of the following is not an ability of client/server computing? a) Alter data stored elsewhere on the network b) Process a transaction that may affect data stored on both client and server computers c) Query or manipulate the warehoused data on the server d) Increased networking capabilities between different file formats on multiple systems 5. Software that enables businesses and government agencies to transmit and manipulate financial data...

Words: 2281 - Pages: 10

Premium Essay

Buisness and Management

...CHAPTER 14 Managerial Accounting ASSIGNMENT CLASSIFICATION TABLE Brief Exercises 1 A Problems B Problems Study Objectives *1. Explain the distinguishing features of managerial accounting. Identify the three broad functions of management. Define the three classes of manufacturing costs. Distinguish between product and period costs. Explain the difference between a merchandising and a manufacturing income statement. Indicate how cost of goods manufactured is determined. Explain the difference between a merchandising and a manufacturing balance sheet. Identify trends in managerial accounting. Prepare a worksheet and closing entries for a manufacturing company. Questions 1, 2, 3 Do It! 1 Exercises 1 *2. 4, 5, 6, 7, 8 11, 12 2, 3 1 *3. 4, 5, 7 2 2, 3, 4, 5, 6 3, 4, 5, 7, 13 8, 12, 13, 14, 15, 17 1A, 2A 1B, 2B *4. 13 6 2 1A, 2A 1B, 2B *5. 9, 14 3A, 4A, 5A 3B, 4B, 5B *6. 15, 16, 17, 18 8, 10, 11 3 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 14, 15, 16, 17 3A, 4A, 5A 3B, 4B, 5B *7. 10, 19, 20, 21 9 3A, 4A 3B, 4B *8. 22, 23, 24 25, 26 27, 28, 29 12 4 18 *9. 19 6A *Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendix to the chapter. Copyright © 2011 John Wiley & Sons, Inc. Kimmel, Accounting, 4/e, Solutions Manual (For Instructor Use Only) 14-1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number 1A Difficulty Level Simple Time Allotted (min.) 20–30 Description Classify manufacturing costs into different...

Words: 10435 - Pages: 42

Premium Essay

Consumer Buying Behaviour in Fairnesscreem

...| ------------------------------------------------- Top of Form | | | | Language | | | | ------------------------------------------------- Top of Form |   Bottom of Form |    | | | | | * Tenders * Downloads * Income Tax Returns * Wealth Tax Return * Forms * Challans * International Taxation * Non Residents * Foreign Companies * Advance Rulings * Transfer Pricing * DTAA * Comprehensive agreements * Limited agreements * Other Agreements * Tax Information Exchange Agreement (TIEA) * Witholding Tax * Tax Law and Rules * Acts * Income Tax Act * Wealth Tax Act * Gift Tax Act * Expenditure Tax Act * Interest Tax Act * Finance Acts * Rules * Income Tax Rules * Wealth Tax Rules * Gift Tax Rules * Expenditure Tax Rules * Interest Tax Rules * Advance Ruling * ITAT Rules * Settlement Commission Rules * Circulars * Notifications * About Us * History of Direct Taxation * Vision, Mission, Values * Organisation and Functions * CBDT * Directorate Generals * Administration * Legal & Research * Systems * Vigilance * NADT * Exemptions * HRD * International Taxation ...

Words: 12280 - Pages: 50

Premium Essay

Accounting Information Systems: Course Objectives, Description, Topics, and Assignments

...OBJECTIVES, DESCRIPTION, TOPICS, AND ASSIGNMENTS ACCT-5600 DR. NICOLAOU Fall 2010 COURSE STRUCTURE In the modern world, the majority of accounting entries occur electronically. Accountants and auditors store information in databases, managed by enterprise systems that have a set of controls to ensure that transactions and record keeping happen as expected. E-business Web sites handle transactions automatically, with the accounting data going directly into the necessary databases. The concept of a paper trail has become a bit of a misnomer; today, because of accounting information systems, there is often no paper involved at all; however, it is important to establish the flow the data in different areas of the organization, or audit trail, so as to properly exercise internal controls. AISs help in this purpose. At the outset of this course, you will learn the basics of accounting information systems and business processes. Next, you will learn about database management systems, and the design of various database models. Finally, you will learn about how to use internal controls effectively for risk management, as well as the requirements for business reporting. After completing this course, you should not only have a clear idea of how accounting information systems work, but you should also be prepared to design and configure them to meet the record-keeping and risk management requirements of the organization. In addition, you will be prepared to design them to...

Words: 6838 - Pages: 28

Premium Essay

Ch1 of Tax Business

...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS Question/ Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Learning Objective LO 1 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 3 Topic Revenue neutrality Controlling the economy Encouraging industries Research and development expenditures Social considerations Earned income credit Charitable contributions Fines and penalties Home ownership Higher education incentives Tax credit versus deduction Alleviating the effect of multiple taxation Double taxation and effect of a credit versus a deduction Wherewithal to pay concept: transfer to controlled corporation Avoiding the corporate income tax Wherewithal to pay: example Recognized gain versus realized gain: amount Like-kind exchange versus involuntary conversion: losses Settlement time period Installment method Keogh Plan: grace period Bracket creep: indexation Community property states Community property states Deterrence provisions $13,000 annual gift tax exclusion: audit Status: Present Edition New New New New New Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Modified Modified New New New New New New New New New New New Q/P in Prior Edition 6 7 8 9 10 11 12 13 14 15 Instructor: For difficulty, timing, and assessment information about each item, see p. 1-3. 1-1 © 2012 Cengage...

Words: 6008 - Pages: 25

Premium Essay

Avis Europe Erp

...The Auditor-General Audit Report No.8 2005–06 Performance Audit Management of the Personnel Management Key Solution (PMKeyS) Implementation Project Department of Defence Australian National Audit Office © Commonwealth of Australia 2005 ISSN 1036–7632 ISBN 0 642 80865 1 COPYRIGHT INFORMATION This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney-General’s Department, Robert Garran Offices, National Circuit Canberra ACT 2600 http://www.ag.gov.au/cca ANAO Audit Report No.8 2005–06 Management of the Personnel Management Key Solution (PMKeyS) Implementation Project 2 Canberra ACT 26 August 2005 Dear Mr President Dear Mr Speaker The Australian National Audit Office has undertaken a performance audit in the Department of Defence. in accordance with the authority contained in the Auditor-General Act 1997. Pursuant to Senate Standing Order 166 relating to the presentation of documents when the Senate is not sitting, I present the report of this audit and the accompanying brochure. The report is titled Management of the Personnel Management Key Solution (PMKeyS) Implementation Project. Following its presentation and receipt, the report will be placed on the Australian...

Words: 24187 - Pages: 97

Premium Essay

Chapter 6 Internal Control in a Financial Statement Audit

...CHAPTER 6 INTERNAL CONTROL IN A FINANCIAL STATEMENT AUDIT Answers to Review Questions 6-1 From management's perspective, the internal control provides a way to meet its stewardship or agency responsibilities. Management also needs a control system that generates reliable information for decision-making purposes. The importance of internal control to the auditor is rooted in the second standard of fieldwork. The controls that are relevant to the entity's ability to initiate, record, process, and report financial data consistent with management's assertions are the auditor's main concern. The auditor needs assurances about the reliability of the data generated within the entity's internal control system in terms of how it affects the fairness of the financial statements and how well the assets and records of the entity are safeguarded. 6-2 The potential benefits and risks to an entity’s internal control from information technology include (see Table 6-1): Benefits: • Consistent application of predefined business rules and performance of complex calculations in processing large volumes of transactions or data. • Enhancement of the timeliness, availability, and accuracy of information. • Facilitation of additional analysis of information. • Enhancement of the ability to monitor the performance of the entity's activities and its policies and procedures. • Reduction in the risk that controls will be circumvented. ...

Words: 3770 - Pages: 16