Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 4, Problem 32C
To determine
Use the six-step approach to resolve the ethical dilemma.
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Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend Juarez Foley asks him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well, auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.”
Identify ways in which a financial statement audit adds value for clients.
List services other than audits that Czarnecki and Hogan likely provides.
Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that you believe the firm should provide and explain why you believe this represents a growth opportunity for CPA firms.
Dave and Charlie are sitting at lunch one day on the premises of one of their large audit clients when the topic of going concern comes
up. Dave mentions to Charlie that he vaguely recalls hearing this term in his accounting classes back in college, but doesn't remember
what this means or why it is part of the audit. Which of the following responses by Charlie would help Dave to understand this? (Select
all that apply.)
Going concern deals with the entity's ability to continue operating as an enterprise, and is an important assumption that the
auditor should evaluate.
The going concern assumption is required to be evaluated by management each year for the forthcoming year.
The going concern assumption is tested by evaluating management's breach of loan and debt covenants over the past three
years.
Going concern really speaks to the client firm's ability to pay its short-term liabilities when they come due, and whether the
firm will need to refinance maturing loans to conserve cash.
Erica Gray, CPA, is a sole practitioner. She has been practicing as an auditor for 10 years. Recently a long-standing audit client asked Gray to design and implement an integrated computer-based accounting information system. The fees associated with this additional engagement with the client are very attractive. However, Gray wonders if she can remain objective on subsequent audits in her evaluation of the client’s accounting system and its records if she was responsible for its design and implementation. Gray knows that professional auditing standards require her to remain independent in fact and appearance from her auditing clients. Submit a substantive posting of at least 250 words that answers the questions
Question 1: What do you believe auditing standards are mainly concerned with when they require independence in fact? In appearance?
Question 2: Why is it important that auditors remain independent of their clients?
Question 3: Do you think Gray can accept this engagement and…
Chapter 4 Solutions
Auditing And Assurance Services
Ch. 4 - Prob. 1RQCh. 4 - Describe an ethical dilemma. How does a person...Ch. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Prob. 11RQCh. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - Prob. 17RQCh. 4 - Prob. 18.1MCQCh. 4 - Prob. 18.2MCQCh. 4 - Prob. 18.3MCQCh. 4 - Prob. 19.1MCQCh. 4 - Prob. 19.2MCQCh. 4 - Prob. 19.3MCQCh. 4 - Prob. 20.1MCQCh. 4 - Prob. 20.2MCQCh. 4 - Prob. 20.3MCQCh. 4 - Prob. 21DQPCh. 4 - Prob. 22DQPCh. 4 - Prob. 23DQPCh. 4 - Prob. 24DQPCh. 4 - Prob. 25DQPCh. 4 - Prob. 26DQPCh. 4 - Prob. 27DQPCh. 4 - Prob. 28DQPCh. 4 - Prob. 30CCh. 4 - Prob. 31CCh. 4 - Prob. 32C
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