Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 1, Problem 38P
To determine
Evaluate the opposing views of Mr. P and Mr. F.
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The following independent situations raise questions about an auditor’s ethical conduct:
An auditor accepts an engagement knowing that she does not have the specialist knowledge required.
An auditor discloses confidential information about a client to a successor auditor.
A public accountant agrees to be the committee chairperson for a local fundraising activity.
4. An auditor accepts a commission from an insurance company for recommending it to one of its audit clients
Indicate in each of the above situation whether the effect on professional ethics is (i) a violation or (ii) not a violation, and explain the reason
North, CPA, is planning an independent audit of the financial statements of General Company. In determining the nature, timing, and extent of the audit procedures, North is considering General’s internal audit function, which is staffed by Tyler.Required:a. In what ways can the internal auditor’s work be relevant to North, the independent auditor?b. What factors should North consider, and what inquiries should North make in deciding whether to use Tyler’s internal audit work?
May chin is an Audit intern at Paul Adam chartered accountants, she isconfused about the responsibilities of the profession. It is difficult for her tounderstand the need for an internal audit when there is an external audit.Explain to her the two types of auditing and what are the differences.
Chapter 1 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 1 - Prob. 1RQCh. 1 - Prob. 2RQCh. 1 - Prob. 3RQCh. 1 - Prob. 4RQCh. 1 - Prob. 5RQCh. 1 - Prob. 6RQCh. 1 - Prob. 7RQCh. 1 - Prob. 8RQCh. 1 - Prob. 9RQCh. 1 - Prob. 10RQ
Ch. 1 - Prob. 11RQCh. 1 - Prob. 12RQCh. 1 - Describe briefly the function of the GAO.Ch. 1 - Prob. 14RQCh. 1 - Prob. 15RQCh. 1 - Prob. 16RQCh. 1 - Prob. 17RQCh. 1 - Prob. 18RQCh. 1 - Prob. 19RQCh. 1 - Prob. 20RQCh. 1 - Prob. 21RQCh. 1 - Prob. 22RQCh. 1 - What characteristics make an accounting...Ch. 1 - Prob. 24RQCh. 1 - Prob. 25QRACh. 1 - A corporation is contemplating issuing debenture...Ch. 1 - Prob. 27QRACh. 1 - Prob. 28QRACh. 1 - Prob. 29AOQCh. 1 - Prob. 29BOQCh. 1 - Prob. 29COQCh. 1 - Prob. 29DOQCh. 1 - Prob. 29EOQCh. 1 - Prob. 29FOQCh. 1 - Prob. 29GOQCh. 1 - Which of the following did not precipitate the...Ch. 1 - Prob. 29IOQCh. 1 - Prob. 29JOQCh. 1 - Prob. 29KOQCh. 1 - Prob. 29LOQCh. 1 - Prob. 30OQCh. 1 - Prob. 31OQCh. 1 - Prob. 32OQCh. 1 - Prob. 33OQCh. 1 - Prob. 34OQCh. 1 - Prob. 35OQCh. 1 - Prob. 36OQCh. 1 - Prob. 37PCh. 1 - Prob. 38PCh. 1 - Will Williams, a college senior, has begun the...Ch. 1 - Smith Co., a local Dallas public accounting firm,...
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Similar questions
- For each of the situations described below, identify the category of threat to the fundamental principles of the SAICA Code of Professional Conduct. Additionally, specify at least one fundamental principle that is compromised in each situation. a) An auditor has shares in a company which is an audit client of theirs. b) An accountant has compiled the financial statements for a client and was requested to also audit the statements. c) The financial director of Baboo Ltd is very aggressive and dismissive of the audit function and audit team. d) A chartered accountant values a client's shares and then leads the negotiations on the sale of the client's company. e) The chartered accountant fails to report a fraud at a client because the perpetrator is a close friend and he is sympathetic to the interest of his friendarrow_forwardVictoria Lilly is a practicing CPA. A long-time audit client has asked Lilly to design and implement a computer-based accounting information system. The fees associated with this opportunity are very attractive. However, Victoria is concerned that she will not be able to maintain objectivity in future financial statement audits if she was responsible for the design and implementation of the client's accounting system. Furthermore, Victoria knows that professional standards require her to remain independent in "fact" and "appearance" from her auditing clients.1. In regards to financial statement audits, what is the difference between independence in "fact" and independence in "appearance"?2. Why do professional standards require that an auditor remain independent of their audit clients?3. Do you believe that Victoria can accept the engagement to develop the client's accounting system and still remain independent? (Support your answer)arrow_forwardJuan Dela Cruz has been asked to accept an engagement to audit a small financial institution. Juan Dela Cruz has not been previously audited a financial institution. Required: Describe the types of knowledge about the prospective client and its industry that Juan Dela Cruz must obtain to plan the engagement Explain how Juan Dela Cruz may obtain this knowledge Discuss how this knowledge of the client’s business and industry will help Juan Dela Cruz in planning and performing an audit in accordance with auditing standards.arrow_forward
- Feller, the sole owner of a small hardware business, has been told that the business should have its financial statements audited by an independent CPA. Feller, having some bookkeeping experience, has personally prepared the company’s financial statements and does not understand why such statements should be audited by a CPA. Feller discussed the matter with Farber, a CPA, and asked Farber to explain why an audit is considered important. a. Describe the objectives of an independent audit b. Identify five ways in which an independent audit may be beneficial to Fellerarrow_forwardAuditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case By having the auditor review his or her own work, the auditor cannot be expected to form an unbiased opinion on the financial statements. Which threat may occur when a previous judgment needs to be re-evaluated by the professional accountant responsible for that judgment? a. Self-review threats b. Advocacy threats c. Intimidation threats d. Self-interest threatsarrow_forwardRefer to the fundamental principles governing an audit. Under the responsibilities principle, auditors are required to exercise due care and maintain professional skepticism throughout the audit. Based on the case information, do you believe that the auditors from Friehling & Horowitz exercised due care and maintained professional skepticism throughoutthe audit? Why or why not?arrow_forward
- According to the standards of the profession, which of the following circumstances will prevent an auditor performing audit engagements from being independent? a.The auditor's brother is the Operations Manager of the firm's client being audited by a team of which the said auditor is not a part of. b.The auditor obtained an automobile loan from a bank which is a client of another auditing firm. c.The auditor's spouse is employed as the Director of finance department of the company the said auditor is currently auditing. d.The auditor's auditing firm is involved in litigation with a previous client relating to billing for consulting services for which the amount involved is insignificant to the firm and to the client company.arrow_forwardMr. Bader is leaving his Auditing Firm to become the Finance Director of his client company. The ethical dilemma that he is most likely to face would be conflict in: a. Confidentiality b. Due Care c. Professional Competence d. Professional Behaviorarrow_forwardChoose the correct.Which of the following is not a way by which the Sarbanes–Oxley Act attempts to ensure auditor independence from an audit client?a. The auditing firm must be appointed by the client’s audit committee.b. Audit fees must be approved by the Public Company Accounting Oversight Board.c. The audit committee must be composed of members of the client’s board of directors who are independent of the management.d. The external auditor cannot also perform financial information system design and implementation work.arrow_forward
- Discuss how each of the following could affect independence of mind and independence in appearance, and evaluate the social consequence of prohibiting auditors from doing each one: Owning stock in a client company. Having bookkeeping services for an audit client performed by the same person who does the audit. Having a spouse who is the chief financial officer of a client company. (More detail)arrow_forwardWhich of the following family relationships is most likely to impair a CPA's independence with respect to a particular audit client on which the CPA works as a “covered member”? Select one: The CPA's spouse participates in a savings plan sponsored by the client. A cousin has an immaterial investment in the client of which the CPA is aware. The CPA's father is president of the audit client. A close relative has a material investment in that client of which the CPA is not aware.arrow_forwardAs part of the ongoing audit of Winter Enterprises, the external auditor, Ghassan CPAS are reviewing the client's balance sheet. An audit manager has noticed a contingent liability on the balance sheet, with an associated note explaining the client believes they may be the subject of litigation in the near future. What would be the auditor's best course of action at this juncture? O Directly contact the client's legal counsel and attempt to obtain further details of the potential litigation. This should be done independently of the client and without the client's knowledge so management cannot alter any documentation or attempt to influence the external legal counsel. Request written assurances from top management, indemnifying the external auditors from any lawsuits filed against the client. Request permission from the client's management to contact the client's legal counsel and discuss the details of this potential litigation. Immediately advise the client in writing of the…arrow_forward
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