Auditing A Risk Based-Approach 11th Edition Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg - Solutions

Auditors following the ISAs would refer to ISA 700 for relevant guidance on audit reports. The format of an ISA audit report is similar to the PCAOB’s report format under the reporting standard, AS 3101, adopted in 2017. Describe the terminology difference between the two standards.
Refer to Exhibit 15.3 and the Why It Matters feature “Differing Guidance on Referring to Other Auditors.” How do the requirements for referring to other auditors differ between U.S. auditing standards and the ISAs?Exhibit 15.3Example of an Excerpt from an Unqualified Audit Report with
Assume that an auditor has identified a number of CAMs.a. What are CAMs?b. For each CAM, what should the auditor include in the audit report?
Under what circumstances must the auditor of a public company express an adverse opinion on the client’s ICFR?
Describe:(a) Lapping and(b) Skimming.
For accounts receivable, what are the more relevant assertions? Why should an auditor identify which assertions are more relevant?
a. What are KAMs?b. In what order should the auditor present the identified KAMs?
You have been assigned to the audit of Marathon Oil Company and will observe the testing of inventory at a major storage area in Ohio. The company has approximately 15 different types of fuel oils stored in various tanks. The value of the fuel varies dramatically according to its grade. Explain how
Fraud related to cash often happens in nonprofit organizations because they tend to lack segregation of duties. Explain how an individual could steal cash from a nonprofit if the individual has responsibility for collecting cash, depositing cash, and recording journal entries.
Refer to the Why It Matters feature at the beginning of the chapter.Why does cash have a high risk of material misstatement, and why was the petty cash account at Koss Corporation inherently risky?
Explain the two ways China Huishan Dairy Holdings Co. Ltd. management violated the existence assertion.
How do auditors use their knowledge about the risk of material misstatement in developing an audit approach? Comment on extensiveness of testing, types of audit procedures, and the rigor of audit procedures in higher versus lower risk settings (e.g., for an assertion with a higher risk of material
a. Explain the two main reasons for AmTrust’s restatement. Why do you think that management judged these issues material, and therefore deemed it necessary to issue the restatements?b. The restatement led to corrections of the company’s three prior years, as well as the first three quarters of
Explain the concepts of block chain and triple-entry accounting.
Articulate organizational risks associated with cyber security attacks.
Explain the four phases of data mining.
Define the term data center. Do you think that Arthur Andersen might still be in existence today if the firm had employed a secure data center, whereby employees of the Houston office of the Enron audit engagement could not have engaged in document shredding?
Define the term key performance indicator. The text provides you with examples of KPIs applicable to revenue cycle activities. Extend that line of thinking and identify at least five possible KPIs relating to inventory accounts.
Companies disclose various risks in their 10-K filings. Regulators encourage companies to make these types of disclosures so that investors can estimate the uncertainties inherent in the organization. Select a company in the pharmaceutical industry; obtain its recent 10-K filing; and identify the
What audit procedures can the auditor complete only at or after period end?
How does inherent risk relate to internal controls? Why is it important to assess inherent risks of material misstatement prior to evaluating the quality of an organization’s internal controls?
The audit report provides reasonable assurance that the financial statements are free from material misstatements. The auditor assesses materiality in planning the audit to ensure that sufficient appropriate audit work is performed to detect material misstatements. However, the auditor is in a
An auditor makes multiple materiality judgements.a. Define planning materiality. Explain how the auditor typically determines and uses it in the audit.b. Define performance materiality. Explain how the auditor typically determines and uses it in the audit.c. Define posting materiality. Explain how
List factors that might affect an audit firm’s client portfolio.
List various procedures the auditor would perform in evaluating whether to accept a potential client.
Identify the accounts associated with the acquisitions and payments for long lived assets cycle.
a. Describe the guidance that the PCAOB provides within the General Auditing Standards about the responsibilities and functions of the independent auditor. b. Then think about the four additional requests that the PCAOB makes:• Exercise due professional care, including professional
In 2015, a jury ruled that Deloitte & Touche LLP wasn’t liable in Florida’s biggest ever insurance-company collapse. The Florida Department of Financial Services did not prove its claims that Deloitte was negligent in its audits for three insurance companies that collapsed after a string of
In 2015, the business press reported that Japan’s Toshiba Corp. over- stated its operating profit by 151.8 billion yen ($1.22 billion) over several years through accounting irregularities involving top management. This overstatement represents approximately one-third of Toshiba’s pre-tax
An auditor issued an unqualified opinion on financial statements that failed to disclose that a significant portion of the accounts receivable was uncollectible. The auditor also failed to follow professional auditing standards with respect to inventory. The auditor knew that the client would use
Describe the elements in the litigation environment that provide incentives to pursue litigation against audit firms.
Refer to the Why It Matters feature “KPMG Fires Five Audit Partners and the Head of Its Audit Practice.” Recall that this incident initially involved a former and a current PCAOB employee, with the latter sup- plying information about upcoming PCAOB inspections of various KPMG audit client
Obtain a copy of the PCAOB’s enforcement Release No. 105-2017-028 (May 24, 2017), with respect to the matter of W.T. Uniack CPA and the audit of Bravo Multinational incorporated. To find it, go to the PCAOB website, look under “Enforcement” and “Settled Disciplinary Orders.”a. While we
Describe some major findings regarding financial reporting frauds that the COSO studies reveal.
Refer to Exhibit 1.8. Read the description of the rule related to Integrity and Objectivity. What does this rule require?Exhibit 1.8 Exhibit 1.8 AICPA Rules of Conduct for Members in Public Practice Rule Section Number What You Should Know Guidance and Topic 100 Integrity and In the performance of
Describe why maintaining auditor independence can help achieve audit quality.
Codes of conduct followed by auditors emphasize the importance of independence to achieving audit quality. Explain why independence is considered the cornerstone of the auditing profession.

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