The Audit Process Principles Practice And Cases 7th Edition Iain Gray, Louise Crawford, Stuart Manson - Solutions

Define the term audit quality and outline how the FRC and audit report users can determine if audit quality has been achieved.
The audit expectations gap will never be closed. Discuss.
To what extent are the determinants and characteristics of audit quality similar to those of the audit expectations gap?
The EU Audit Regulation (537/2014)states: ‘The public-interest function of statutory audit means that a broad community of people and institutions rely on the quality of a statutory auditor’s or an audit firm’s work. Good audit quality contributes to the orderly functioning of markets by
The EU Audit Regulation (537/2014)states: ‘In order to increase the confidence in . . . the statutory auditors and the audit firms carrying out the statutory audit of public-interest entities, it is important that the transparency reporting by statutory auditors and audit firms be increased’
In 2018, the FRC reported a decline in audit inspection results across the Big Four audit practices in the UK. The FRC warned that ‘the Big Four audit practices must act swiftly to reverse the decline in this year’s audit inspection results if they are to achieve the targets for audit quality
Consider the following statements and explain why they may be true or false:(a) Auditors can only be successfully sued by parties with whom they have a contract.(b) Auditors who during the course of their work come into possession of unpublished information which they use in a decision to buy
In the following scenarios you are required to discuss the possibility of the auditors being guilty of negligence:(a) Cedra Ltd a manufacturing company has been audited by Dove & Co.for the last 14 years. It has recently been discovered that a massive fraud involving three of the directors of the
Your firm of certified accountants, in common with many other firms of accountants and auditors, issues to its staff an audit manual which contains, among other matters, recommended procedures to be adopted in carrying out audits. A number of these recommended procedures relate to physical
Discuss what you understand by the following terms:(i) foreseeability(ii) proximity(iii) assumption of responsibility.
Describe the difference between proportionate liability and contributory negligence.
Discuss the extent to which you believe liability limitation agreements will be helpful in mitigating auditors’ exposure to large claims for negligence.
Placing limitations on auditors’ liability for negligent misstatements is likely to result in a reduction in the quality of auditing. Discuss.
The opinions offered by the judges in the Caparo case show that they are out of touch with commercial reality. Discuss.
Critically evaluate the statement that the constant lobbying by the auditing profession for reductions in their exposure to liability claims simply demonstrates that they are a self-interested profit maximizing trade association and not interested in the public good.
Much of the criticism of auditing as a profession is misplaced and irrelevant because the meaning now attached to the term ‘profession’ has changed from how it was used at the beginning of the twentieth century.Discuss.
Discuss the contribution that IFAC has made to the regulation of auditing.
There has been much discussion in the financial press about the failings of the FRC as a regulator. Outline what are the main concerns of the critics and give your views on whether it is justified.
Insufficient attention is being paid to the needs, nature and size of the multinational companies the Big Four presently audit when there is discussion of the ways in which competition for such audits can be enhanced. Discuss.
Obtain a recent annual report, such as that of Rolls-Royce plc, which we have cited in the text, and identify what elements in the audit report you believe are likely to be of most interest to investors.
The Big Four audit firms are now so large and powerful that they are no longer different from any other multinational business and we need to accept this and the corollary that they are largely profit-seeking enterprises.
Critics’ obsession with attacking what they perceive to be the lack of independence of audit firms from their clients is misplaced.Discuss.
The future of the audit is going to be determined by the benefits brought about by the widespread use of audit data analytics in the audit of large listed companies.Discuss.
Any discussion about the regulation of auditing now needs to take into account that we live in a globalized world. Discuss.
Broomfield plc is a large company manufacturing and selling furniture and beds through its own department stores. Some goods are available for immediate delivery, but to keep inventories low, some ranges are manufactured to order, the stores having examples of main lines.Customers choose goods from
1 The company has some 50 suppliers whose records are held on computer master file, updated by the buyer, Ivor Jordan, using a terminal in his department.2 Ivor prepares a purchases budget annually on the basis of a sales budget and estimated minimum inventory levels and suppliers, lead times. The
The balance sheets of Carnbee Limited, a trading company, at 31 August 2020 and 31 August 2019 together with profit and loss account extracts are as follows:You are planning your audit approach for the year ended 31 August 2020. What areas would you regard as being of low risk and of high risk? Are
Auditors have a responsibility under ISA 265 (UK and Ireland) Communicating deficiencies in internal control to those charged with governance and management, to communicate deficiencies in internal controls.In particular SIGNIFICANT deficiencies in internal controls must be communicated in writing
You are auditing a company engaged in the development and sale of games software over the Internet. You are satisfied that the software is of high quality and are now directing your attention to the controls over the sale of their products.You have confirmed that the company’s systems are fully
Explain the objectives of walk-through test, tests of control and substantive tests and give examples of each.
Audit working files show why the audit team has reached its conclusions.Discuss.
We mention frequently in the text the term ‘genuine, accurate and complete’.Explain what the term means.
Refer to questions 9.2 and 9.3 above and explain how a data flow diagram would help the auditor to understand how the entity’s order entry system is operating.Why would a data flow diagram be better than a document flowchart for this purpose?Questions 9.2Assume that Ann Paterson, an established
Suggest why auditors might be in a good position to provide a service giving assurance on the effectiveness of the company’s information and control system. Take a look at Table1.1 while you are considering this matter. TABLE 1.1 The audit year Gilsland Electronics Limited Date Preliminary stages
In 1890, the Brooklyn Trolley Dodgers professional baseball team joined the National League. Over the following years, the Dodgers would have considerable difficulty competing with the other baseball teams in the New York City area. Those teams, principal among them the New York Yankees, were much
Lore Levi was worried as she scanned the March 1983 bank statement for the Howard Street Jewelers. ${ }^{1}$ For more than four decades, she and her husband, Julius, had owned and operated the small business. Certainly the business had experienced ups and downs before, but now it seemed to be in
Bill Lee retired in the mid-1990s from Triton Energy after leading the Dallas-based oil and gas exploration firm through three turbulent decades. During Lee's tenure, Triton discovered large oil and gas deposits in several remote sites scattered around the globe. Although adept at finding oil,
"Checker needed up front." Kirby Jacobson placed a final can on the shelf in front of him and then turned and headed for the checkout stand at the front of the store. Kirby worked for Troberg Stores, a chain of small grocery stores located in a cluster of small towns in northern Minnesota. After
In 1990, David Sokol faced a problem that has stymied the careers of many business executives. ${ }^{1}$ At the time, Sokol served as president of Ogden Projects, Inc., an environmental services company. Sokol had his sights set on becoming the company's chief executive officer (CEO), but
Russell Smith knew why he had been summoned to the office of A. Walter Rognlien, the 74-year-old chairman of the board and chief executive officer of Smith's employer, Cardillo Travel Systems, Inc. ${ }^{1}$ Just two days earlier, Cardillo's in-house attorney, Raymond Riley, had requested that
Jim and Tammy Faye Bakker founded the PTL (Praise the Lord) Club, a religious broadcasting organization, in 1974. A little more than one decade later, the PTL Club claimed more than 500,000 members and boasted annual revenues of almost $\$ 130$ million. Bakker and his close associates came under
Law enforcement authorities and officials of regulatory agencies frequently receive anonymous "hot tips." The shy tipsters typically charge that an individual or organization has violated one or more laws or regulatory directives and demand that the "guilty" party be brought to justice. When such
Tommy $\mathrm{O}^{\prime}$ Connell had been a senior with a Big Five accounting firm for less than one month when he was assigned to the audit engagement for the Altamesa Manufacturing Company. ${ }^{1}$ Tommy worked out of his firm's Fort Worth, Texas, office, while Altamesa was headquartered
In the spring of 2000, the Council or governing body of the American Institute of Certified Public Accountants (AICPA) met to discuss two strategic initiatives. ${ }^{1}$ If implemented, the initiatives would have far-reaching implications for the public accounting profession. Barry Melancon, the
San Diego-based National Medical Transportation Network (MedTrans) eventually became the largest ambulance services provider in the United States. Reaching that pinnacle was not an easy journey. In early 1992, MedTrans encountered cash flow problems that prompted the company's two owners to search
For most of his life, New York City businessman I. Jerome Riker was a powerful man with an extensive network of influential friends and business associates. Probably the most influential of Riker's friends was Roy M. Cohn. Cohn served as the prosecuting attorney in the Julius and Ethel Rosenberg
In 1960, four partners founded Equity Funding Corporation of America, each assuming an equal ownership interest in the firm. Two of the partners soon resigned, leaving the small company to Stanley Goldblum, who held the title of president, and Michael Riordan, who served as chairman of the board.
Anthony Natelli was frustrated. For several days, Natelli had been working frantically on a 112-page proxy statement for one of his audit clients, National Student Marketing Corporation (NSMC). It was 2:00 A.M. on August 15, 1969, and Natelli was sitting in the New York City offices of Pandick
Satoshi Hirata served on the audit staff of Asahi, one of Japan’s four largest public accounting fi rms.1 Like its three principal rivals, Asahi was affiliated with one of the Big Four international accounting firms, namely, KPMG. Throughout the spring of 2003, Hirata had been assigned to the
After earning a law degree from the University of Capetown in 1988, 24-year-old Brett Kebble accepted an entry-level position with a prestigious Capetown law firm. The gregarious and impetuous Kebble soon realized that it would take years, if not decades, to achieve his personal goal of “making a
Every four years, the International Federation of Accountants (IFAC) organizes the World Congress of Accountants.1 Accountants from across the globe attend this meeting to share their views on major issues and challenges facing their profession. In November 2002, the People’s Republic of China
In February 2002, a lengthy Business Week article examined a major financial scandal swirling around one of the large international accounting firms. Key features of the scandal included the accounting firm allegedly “overlooking wildly improper deals” in its audits of a huge client that ranked
Prior to the Islamic conquest of the Middle East, the ancient Zoroastrian religion was the national religion of Persia. To escape persecution for their religious beliefs, a large band of Persian Zoroastrians migrated eastward during the eighth century A.D., eventually settling in modern-day India.
The spice trade first brought European explorers, most notably the Portuguese adventurer Vasco da Gama, to the shores of the Indian sub-continent in the late fifteenth century. In the mid-eighteenth century, Great Britain used a series of military excursions to gain control over several major
During the 1970s, the public accounting profession eliminated its bans on competitive bidding, advertising, direct solicitation, and related practices that the Federal Trade Commission maintained were restraints of trade. The decision to drop those restrictions contributed to the increasingly
In the late 1970s, William Nashwinter accepted a position as a salesman with Doughtie's Foods, Inc., a publicly owned food products company headquartered in Portsmouth, Virginia. ${ }^{1}$ The ambitious young salesman impressed his superiors with his hard work and dedication and was soon promoted
As for most young professionals, earning a reasonable livelihood ranked as a top priority for Scott Fane, a CPA specializing in taxation services who relocated to Florida in the mid-1980s. To practice as a CPA in Florida, Scott registered with the Florida Board of Accountancy, which regulates the
In 1978, at the age of 34, Ann Hopkins faced a dilemma that a growing number of professional women are being forced to confront. Hopkins had to make a difficult choice involving her family and her career. Although comfortable with her position at Touche Ross & Company, for which she had worked
In 1990, David Sokol faced a problem that has stymied the careers of many business executives. At the time, Sokol served as president of Ogden Projects, Inc., an environmental services company. Sokol had his sights set on becoming the company’s chief executive officer (CEO), but something, or
In the late 1990s, the investing public’s fascination with Internet-based companies prompted the cyberspace equivalent of the Oklahoma Land Rush, according to one prominent Wall Street analyst. “In a land rush, you suspend rules because your perception is that time is of the essence.”1 That
Charles Keating, Jr., was a scholar-athlete at the University of Cincinnati during the mid-1940s. In 1946, Keating won an NCAA individual championship in the 200-yard butterfly, a swimming event, and two years later graduated from the University of Cincinnati Law School. Over the next 30 years,
In 1969, Eddie Antar, a 21-year-old high school dropout from Brooklyn, opened a consumer electronics store with 150 square feet of floor space in New York City. Despite this modest beginning, Antar would eventually dominate the retail consumer electronics market in the New York City metropolitan
On May 19, 1987, a short article in The Wall Street Journal reported that ZZZZ Best Company, Inc., of Reseda, California, had signed a contract for a $$13.8$ million insurance restoration project. This project was just the most recent of a series of large restoration jobs obtained by ZZZZ Best
The United States prides itself in being first in a wide range of socioeconomic, scientific, and cultural “top ten” lists. One ranking that does nothing to bolster national pride among United States citizens, however, is the nation’s claim to watching more television programming than any
From 1962 to 1992, Ed McMahon served as the quintessential sidekick and straight man to Johnny Carson on the long-running and popular television program The Tonight Show. After leaving that program, McMahon stayed in the television spotlight for 12 years by serving as the host of Star Search, a
Bernard Lawrence Madoff was born on April 29, 1938, in New York City. Madoff spent his childhood in a lower middle-class neighborhood in the borough of Queens. After graduating from high school, Madoff enrolled in the University of Alabama but transferred to Hofstra College, now known as Hofstra
Executives in the multibillion-dollar toy industry constantly search for the next big “hit,” a magical toy that will trigger a nationwide frenzy among youngsters comparable to the mania sparked in recent decades by the Cabbage Patch Kids and Tickle Me Elmo. In more “ancient” times, silly
In 1975, Carlos Cordova and several other investors founded Capital National Bank (CNB) in Bronx, New York.1 Cordova was appointed the bank’s chief executive officer (CEO) and chairman of the board. Over the next several years, the bank opened five branch offices in the New York City metropolitan
In 1955, James Luther Turner and his son, Cal, opened a small retail store in Scottsville, Kentucky. The Turners hoped to emulate (on a smaller scale) the business model of major discount retailers that had become well established in the United States in the decade following World War II. The
During the 1980s, CBI Holding Company, Inc., a New York–based firm, served as the parent company for several wholly owned subsidiaries, principal among them Common Brothers, Inc. CBI’s subsidiaries marketed an extensive line of pharmaceutical products. The subsidiaries purchased these products
Campbell Soup easily qualifies as one of the most recognizable brand names across the globe. Founded shortly before the start of the Civil War, Campbell Soup Company long had a reputation as having one of the most rigid corporate cultures in the United States. An unwritten but strictly enforced
In 1890, the Brooklyn Trolley Dodgers professional baseball team joined the National League. Over the following years, the Dodgers would have considerable difficulty competing with the other baseball teams in the New York City area. Those teams, principal among them the New York Yankees, were much
Lore Levi was worried as she scanned the March 1983 bank statement for the Howard Street Jewelers.1 For more than four decades, she and her husband, Julius, had owned and operated the small business that they had opened after fleeing Nazi Germany during World War II. Certainly the business had
In 1887, several of Denver’s community and religious leaders established the Charity Organization Society. During its first year of operation, that organization raised a little more than $$20,000,$ which it then distributed to several local charities. The charity of charities fundraising
Bill Lee retired in the mid-1990s from Triton Energy after leading the Dallas-based oil and gas exploration firm through three turbulent decades. During Lee’s tenure, Triton discovered large oil and gas deposits in several remote sites scattered around the globe. Although adept at finding oil,
“Checker needed up front.”Kirby Jacobson placed a final can on the shelf in front of him and then turned and headed for the checkout stand at the front of the store. Kirby worked for Troberg Stores, a chain of small grocery stores located in a cluster of small towns in northern Minnesota. After
Alex Fries emigrated to the United States from Germany in the early nineteenth century.1 The excitement and opportunities promised by the western frontier fascinated thousands of new Americans, including the young German, who followed his dreams and the Ohio River west to Cincinnati. A chemist by
Arvel Ray Smart was born in Lebanon, Missouri, and grew up in the small town of Bolivar, 40 miles west of Lebanon in southeastern Missouri.1 Arvel’s mother and father graduated from the University of Missouri with accounting degrees in the mid-1970s. The Smarts spent three years working on the
We have all had that friend, an individual who attaches himself or herself to us without our encouragement—or approval, for that matter.1 For Debbie Woodruff, that friend was David Quinn. Debbie met David in the very first college accounting class that either of them took at the large public
Russell Smith knew why he had been summoned to the offi ce of A. Walter Rognlien, the 74-year-old chairman of the board and chief executive offi cer (CEO) of Smith’s employer, Cardillo Travel Systems, Inc.1 Just two days earlier, Cardillo’s in-house attorney, Raymond Riley, had requested that
Executives of The North Face, Inc., faced a troubling dilemma during the 1990s.1 For decades, those executives had struggled to develop and maintain an exclusive brand name for their company’s extensive line of outdoor apparel and sporting equipment products. By positioning those products for the
Waverly Edward Holland, III, grew up in sunny Tucson, Arizona, but his heart was always in the mountains of Colorado. From the age of three, “Dutch” spent at least one week each winter at Aspen, Breckenridge, Vail, or some other Colorado ski resort with his family. He loved the weather and the
Becoming a partner with one of the large international accounting firms easily ranks among the most common career goals of accounting majors.1 Michael Goodbread staked out that career goal four decades ago. After graduating from college, Goodbread made the first step toward reaching his objective
Awaiting his court appearance to be charged with securities fraud, David Myers sat in a jail cell in 2002 and counted the cinder blocks again and again to distract himself.1 In his pocket was a plastic red dog named Clifford, given to him by his young son. “He’ll take care of you,” the boy
Tommy O’Connell had been a senior with one of the major international accounting firms for less than one month when he was assigned to the audit engagement for the Altamesa Manufacturing Company.1 Tommy worked out of his firm’s Fort Worth, Texas, office, while Altamesa was headquartered in
In 1990. David Sokol faced a problem that has stymied the careers of many business executives. At the time, Sokol served as president of Ogden Projects, Inc., an environ- mental services company: Sokol had his sights set on becoming the company's chief executive officer (CEO), but something, or
Executives in the multibillion-dollar toy industry constantly search for the next big "hit," a magical toy that will trigger a nationwide frenzy among youngsters comparable to the mania sparked in recent decades by the Cabbage Patch Kids and Tickle Me Elmo. In more "ancient" times, silly putty, the
In 1975, Carlos Cordova and several other investors founded Capital National Bank (CNB) in Bronx, New York. Cordova was appointed the bank's chief executive officer and chairman of the board. Over the next several years, the bank opened five branch offices in the New York City metropolitan area.
Consider the truth or falsity of the following statements:(a) Sufficient evidence for the auditor means having enough to form a conclusion that an assertion made by management may be accepted.(b) Relevant evidence for the auditor would include the following:(i) the dates that the chief accountant
You are the auditor of Oakshow Ltd and are searching for evidence to prove that the figures for purchases and related creditors are true and fair in the context of the accounts, taken as a whole. You have extracted the following information from the accounts at 31 December 2019.Your audit work has
Below is a list of sources of audit evidence:(i) The chief accountant, who is a member of CIMA, explaining why inventory levels are higher at the end than at the beginning of the year.(ii) A storeman in the main store explaining how the store control system operates.(iii) An invoice from a supplier
Explain the meaning of the following terms:(i) interim examination(ii) final examination(iii) inconsistent audit evidence(iv) systems-based evidence(v) third-party evidence(vi) persuasive evidence.
An important objective of the business risk approach is to make the audit more profitable by cutting down on the amount of evidence obtained by substantive tests of detail.Discuss.
You are the engagement partner of an audit assignment with an entity specializing in the provision of information technology services and software. At the beginning of the financial year the company entered into a contract with the government of China and you have been discussing the implications
Explain how a review engagement differs from an audit engagement. Explain why a report on a review engagement might be useful to the person requesting that the engagement be carried out.
Audit evidence is required to be both sufficient and appropriate. Explain what is meant by this statement giving appropriate examples.
There is a direct relationship between audit risk and the audit evidence search. Discuss.
Explain why audit judgement is a vital element of obtaining sufficient, appropriate audit evidence.
Explain why a good system of corporate governance is essential if the business risk approach is to be adopted.
Explain the importance of internal control within organizations. What are the main elements and what is the auditor’s interest in them?

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The Audit Process Principles Practice And Cases 7th Edition Iain Gray, Louise Crawford, Stuart Manson - Solutions

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