Type:
Solution Manual
Resource:
Auditing The Art and Science of Assurance Engagements
Edition:
13th Edition
Author(s):
Alvin A. Arens Randal J. Elder Mark S. Beasly Joanne C. Jones
INSTRUCTOR’S RESOURCE MANUAL Bartosz Amerski York University Joanne C. Jones York University
Auditing The Art and Science of Assurance Engagements Canadian Thirteenth Edition Alvin A. Arens PricewaterhouseCoopers Emeritus Professor, Michigan State University Randal J. Elder Syracuse University Mark S. Beasley North Carolina State University, Deloitte Professor of Enterprise Risk Management Joanne C. Jones York University
Contents Page An Overview of the Instructor’s Resource Manual ........................................ iv
Chapters
ii
1
The demand for an auditing and other assurance services.................... 1
2
The public accounting profession and audit quality ................................ 8
3
Legal liability ........................................................................................ 14
4
Professional judgment and ethics ........................................................ 18
5
Audit responsibilities and objectives..................................................... 28
6
Client acceptance and planning the audit ............................................ 38
7
Materiality and risk ............................................................................... 46
8
Internal control and control risk ............................................................ 55
9
Audit evidence...................................................................................... 64
10
Audit strategy and audit program ......................................................... 74
11
Audit sampling concepts ...................................................................... 81
12
Audit of the revenue cycle .................................................................... 91
13
Audit of the acquisition and payment cycle .......................................... 99
14
Audit of the inventory and distribution cycle ....................................... 105
15
Audit of the human resources and payroll cycle ................................. 112
16
Audit of the capital acquisition and payment cycle ............................. 116
17
Audit of cash balances ....................................................................... 121
18
Completing the audit .......................................................................... 125
.
19
Audit reports on financial statements ................................................. 132
20
Other assurance and nonassurance services .................................... 142
.
iii
Chapter 1 The Demand for Audit and Other Assurance Services Overview Usually students will not have read Chapter 1 before the material in this chapter is covered. Most students are also not familiar with the concept of “audit” and we also need to keep in mind that the vocabulary used in this course is also new for most students. Accordingly we spend more time taking up this material, and explaining the fundamental concept of audit, which usually requires the majority of the scheduled time of the first day of class (assuming 1 ½ hour class). In addition to reviewing the detailed course outline for the course, we attempt to cover the opening vignette and learning objectives.
Learning objectives 1. 2. 3. 4. 5. 6.
Describe auditing. Distinguish between auditing and accounting. Explain the importance of auditing and reducing information risk. List the causes of information risk, and explain how this risk can be reduced. Identify major types of audits and auditors. Describe assurance services provided by public accountants and distinguish the audit of financial statements from other assurance and nonassurance services.
Chapter opening vignette: ”Auditors Have a Great Responsibility” This vignette first explores the events leading up to the “Sponsorship Scandal” that occurred in 2000. It then outlines the actions undertaken by the minister of public works who called in Sheila Fraser, the auditor general to investigate Department of Public Works advertising contract irregularities. The vignette then goes on to describe the key audit findings made by the Auditor General. It also provides some insight into what users expect from auditors – being forthright and candid (acting with integrity) and checking on their behalf (acting in the public interest). Information from the opening vignette can be used as a lecture review and used to link concepts introduced during the lecture to real-life situations. (Since most students have not read the textbook prior to class, you may want to set aside a few minutes for them to read the vignette).
LO 1 Describe auditing Three concepts to highlight: •
Evidence (define the term)
.
1