Questions from Auditing and Assurance

Q: Section 301 of the Sarbanes-Oxley Act requires that public companies

Section 301 of the Sarbanes-Oxley Act requires that public companies have an audit committee. Independent auditors are increasingly involved with audit committees. Required: a. Describe what an audit...

Q: Briefly discuss why auditors must often exercise creativity and innovation in auditing

Briefly discuss why auditors must often exercise creativity and innovation in auditing financial statements. Give an example different from the one offered in the chapter’s conclusion.

Q: Suppose that you are the auditor of a major retail client who

Suppose that you are the auditor of a major retail client who has reported the following income before taxes (IBT) for the first two quarters of the year: 1st quarter = $1,200,000 and 2nd quarter = $1...

Q: The CPA firm of Lumley & Lu uses a quantitative approach to

The CPA firm of Lumley & Lu uses a quantitative approach to implementing the audit risk model. Calculate detection risk for each of the following hypothetical clients.

Q: The CPA firm of Quigley & Associates uses a qualitative approach to

The CPA firm of Quigley & Associates uses a qualitative approach to implementing the audit risk model. Audit risk is categorized using two terms: very low and low. The risk of material misstatemen...

Q: You are considering acceptable audit risk at the financial statement level.

You are considering acceptable audit risk at the financial statement level. For each of the following independent scenarios, based only on the information provided, indicate the effect on acceptable a...

Q: When planning a financial statement audit, a CPA must understand audit

When planning a financial statement audit, a CPA must understand audit risk and its components. The firm of Pack & Peck evaluates the risk of material misstatement (RMM) by disaggregating RMM into...

Q: For each of the following situations, explain how risk of material

For each of the following situations, explain how risk of material misstatement should be assessed and what effect that assessment will have on detection risk. a. Johnson, Inc., is a fast-growing truc...

Q: In developing an understanding of the entity and its environment, the

In developing an understanding of the entity and its environment, the auditor can obtain information from numerous sources, such as knowledge from prior audits and discussions with management. List fi...

Q: Industry conditions can be a source of business risks for an entity

Industry conditions can be a source of business risks for an entity. Describe how each of the following industry conditions can result in business risks. a. The entity’s market characteristics (e.g.,...