Auditing

2. Define assurance services. What are the two distinct types?

An assurance service is a term used to describe the wide range of services provided by independent
Certified public accountants that enhance information. The two types of services are; those that
increase the reliability of information, and those that involve putting information in a form or context
that facilitates decision making.
3. What is the most common type of attest engagement? What is most frequently being asserted by
management on this type of engagement?
The most common type of attest engagement is the Auditing of the financial statements. Publicly
traded companies are required by law to have this service done to avoid embezzlement and to give
credibility to the data represented in the financial statements. When the financial statements are being
audited the audit addresses managements assertions that the assets listed truly exist, and that valuations
are accurate. Essentially the assertions by management are being proven accurate by the auditor.
6. Explain the following statement: One contribution of the independent auditor is to lend credibility to the
financial statements.
Auditors lend credibility to the financial statements via the attest function. It essentially functions as
a seal of approval from a licensed professional. The same credibility is established when a doctor makes a
diagnosis, or a lawyer gives legal advice. A certified individual is considered a professional, and a
professional approval holds weight.
7. The overall risk of the investment in a business includes both business risk and information risk. Contrast
these two types of risk. Which one is most directly affected by the auditors?
In contrasting Business and information risk the difference is really what the name states. Business
risk is the actual risk associated with the success of the business. Can the company make payments?
What is the financial position of the company? The Quality of the management and workers? It boils
down to the risk that is made real just by the company existing.
Information risk however, differs in the fact that it is the chance that the information used to asses
and analyze business risk is inaccurate. Is 100% of the data listed in the financial statements
accurate and following U.S. GAAP
Auditing significantly affects information risk. The credibility that an auditor assured document is
being used to base business decisions off of significantly lowers the risk that information is
inaccurate. I.e. using the financial statements to take out a loan.
17. Apart from auditing, what other professional services are offered by public accounting firms?
Apart from auditing CPA firms offer a varity of Tax, consulting and accounting and review services.
While these services are also offered by non-CPA certified accountants, the Attest function of a CPA makes
the services unique.

22. List three of the more important responsibilities of a partner in a public accounting firm.
The most important responsibilities of a partner in a accounting firm are assuring that audits are
performed in accordance with professional standards. This is done through adequate planning, supervision,
and execution of the audit. Other responsibilities include maintaining primary contact with clients. Such
things as discussing objectives and the scope of the audit work, resolving controversies and attending
stockholder meetings to answer questions. Partners also recruit new staff members, supervise staff, review
audits, and sign the audit reports
28.
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
31.

1. Quality Control

a. Regulation of auditors of Public companies

2. Operational Audit
3. Internal Control

b. Opinion
c. Material Information

4.Government Accountability office

5. Disclosure

d. Credibility
e. Peer Review

6. Critical Characteristic that must be maintained

By the accounting profession.
7. Public Company Accounting Oversight Board
efficiency of a unit of an
8. Securities and Exchange Commission
9. Audited financial Statements
10. Compilation of Financial Statements

f. Registration Statement
g. accounting service
h. Measurement of effectiveness and
organization
i. Basis for sampling and testing
j. Auditing staff reporting to congress

Identify the most closely related terms in columns 1 and 2. Organize your answer in a two-column
format by copying the numbers and terms in column 1 as given. Then rearrange the sequence of terms in
column 2 so that each line of your schedule will contain two closely related items
32.

a) When financial statements are involved, this is referred to as an audit

b) The term we are not aware of any material modifications that should be made is often included in
the report.
c) The report issued provides a summary of procedures followed and findings
d) The report issued provides reasonable assurance.
e) The procedures involved are generally limited to inquiry and analytical procedures.
f) The report issued provides absolute assurance.
g) The report issued provides limited assurance.
h) The procedures followed are agreed upon with the specified user or users.
i) This type of engagement provides more assurance than a review.
j) The CPA need not be independent to preform this service.
Examination (E)
Review (R)
Agreed upon procedures (A)
Does not Relate (N)