Download Test Bank Principles of Auditing and Other Assurance Services 20th Edition Whittington Pany + Solutions PDF

TitleTest Bank Principles of Auditing and Other Assurance Services 20th Edition Whittington Pany + Solutions
TagsAudit Financial Audit Financial Statement Auditor's Report
File Size587.6 KB
Total Pages41
Document Text Contents
Page 20

Principles of Auditing and other Assurance Services 20th edition Test Bank Solutions

2-20



30.
Primary responsibility for the financial statements lies with:





Auditors Management

A. Yes Yes

B. Yes No

C. No Yes

D. No No









A. Option A


B. Option B


C. Option C


D. Option D




AACSB: Communication

AICPA: BB Industry

AICPA: FN Reporting

Blooms: Remember

Difficulty: 2 Medium

Learning Objective: 02-04 Explain the key elements of the auditors' standard report.

Topic: Auditors' Reports

Page 40

Principles of Auditing and other Assurance Services 20th edition Test Bank Solutions

2-40



62. Auditors must consider the possibility of fraud by employees or management on every audit

engagement. They must also consider the possibility that the client has not complied with

laws.



(a) Distinguish between employee and management fraud.

(b) Describe the auditors' responsibility for the detection of fraud in an audit.

(c) Describe the auditors' responsibility regarding noncompliance with laws by a client.





(a) Employee fraud is dishonest actions by lower level employees that occur within a company

despite management's efforts to prevent such actions. Management fraud occurs when the top

executives of a company deliberately deceive stockholders, creditors, and the auditors by

misstating the financial statements.

(b) The auditors have a responsibility to design the audit to provide reasonable assurance of

detecting material errors and fraud and to conduct the audit with due care and professional

skepticism.

(c) An audit cannot be relied upon to detect all noncompliance with laws by the client. For

laws which have a direct and material effect on the financial statement amounts, the

responsibility for detection is the same as that for errors and fraud-that is to design the audit to

provide reasonable assurance of detection. For other laws (those having an indirect effect on

the financial statement amounts), an audit does not provide reasonable assurance of

detection.



AACSB: Reflective Thinking

AICPA: BB Critical Thinking

AICPA: FN Decision Making

Blooms: Understand

Difficulty: 3 Hard

Learning Objective: 02-03 Discuss the auditors' responsibility for detecting errors, fraud, and noncompliance with laws and

regulations.

Topic: Detecting Misstatements





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