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1-8
1-17 a. The services provided by Consumers Union are very similar to
assurance services provided by CPA firms. The services provided
by Consumers Union and assurance services provided by CPA
b. The concepts of information risk for the buyer of an automobile and
for the user of financial statements are essentially the same. They
are both concerned with the problem of unreliable information being
provided. In the case of the auditor, the user is concerned about
c. The four causes of information risk are essentially the same for a
buyer of an automobile and a user of financial statements:
(1) Remoteness of information It is difficult for a user to obtain
much information about either an automobile manufacturer
(2) Biases and motives of provider There is a conflict between
not available or too costly to obtain.
(4) Complex exchange transactions The acquisition of an
automobile is expensive and certainly a complex decision
1-9
1-17 (continued)
various magazines.
(2) User shares information risk with management The
manufacturer of a product has a responsibility to meet its
1-18 a. The following parts of the definition of auditing are related to the
narrative:
(1) Altman is being asked to issue a report about qualitative and
market value of each truck.
(3) Samantha Altman will accumulate and evaluate four types of
evidence:
(a) Count the trucks to determine their existence.
determine ownership.
(c) Examine the trucks to determine each truck's physical
condition.
(d) Examine the blue book to determine the fair market
value of each truck.
1-18 (continued)
(5) The report results are to include:
parking lot the night of June 30.
(b) whether all of the trucks are owned by Regional
Delivery Service.
b. The only parts of the audit that will be difficult for Altman are:
(1) Evaluating the condition, using the guidelines of poor, good,
and excellent. It is highly subjective to do so. If she uses a
using this guideline.
(2) Determining the fair market value, unless it is clearly defined
1-19 a. The major advantages and disadvantages of a career as an IRS
EMPLOYMENT
ADVANTAGES
DISADVANTAGES
INTERNAL
REVENUE
AGENT
1. Extensive training in
individual, corporate, gift,
trust and other taxes is
available with concentration
in area chosen.
2. Hands-on experience with
sophisticated selection
techniques.
1. Experience limited to
taxes.
2. No experience with
operational or financial
statement auditing.
3. Training is not extensive
with any business
enterprise.
CPA
1. Extensive training in audit of
financial statements,
compliance auditing and
operational auditing.
2. Opportunity for experience in
auditing, tax consulting, and
management consulting
practices.
3. Experience in a diversity of
enterprises and industries
1. Exposure to taxes and to
the business enterprise
may not be as in-depth as
the internal revenue agent
or the internal auditor.
2. Likely to be less exposed
to operational auditing
than is likely for internal
auditors.
1-19 (continued)
EMPLOYMENT
ADVANTAGES
DISADVANTAGES
INTERNAL
AUDITOR
1. Extensive exposure to all
segments of the enterprise
with which employed.
2. Constant exposure to one
industry presenting
opportunity for expertise in
that industry.
3. Likely to have exposure to
compliance, financial, and
operational auditing.
1. Little exposure to taxation
and the audit of taxes.
2. Experience is limited to
one enterprise, usually
within one or a limited
number of industries.
GAO AUDITOR
1. Increasing opportunity for
experience in operational
auditing.
2. Exposure to highly
sophisticated statistical
sampling and computer
auditing techniques.
1. Little exposure to diversity
of enterprises and
industries.
2. Bureaucracy of federal
government.
facets of a business. IRS agents and GAO auditors would be in
demand for fraud examinations relating specifically to tax fraud or
governmental entities.
(e.g., Department of Homeland Security)
Auditors for many state and local government units (e.g.,
state insurance or bank auditors)
1-12
are:
EXAMPLE
a. TYPE OF AUDITOR
b. TYPE OF AUDIT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
IRS
IRS
Internal auditor or CPA
CPA
Internal auditor or CPA
Internal auditor or CPA
Internal auditor or CPA
CPA or internal auditor
GAO
CPA
GAO
GAO
Compliance
Compliance
Financial statements or operational
Financial statements
Compliance
Compliance
Operational
Financial statements
Operational
Financial statements
Financial statements
Compliance
operations.
b. Czarnecki and Hogan likely provide tax services, accounting
1-22 a. Assurance related to financial statements are the most likely forms
of assurance that are likely to be provided only by public accounting
firms. Examples include audits of historical financial statements,
reviews of historical financial statements, audits of internal control
1-13
1-22 (continued)
ISO 9000 certifications.
c. Table 1-1 on p. 11 includes some examples of assurance that may
be provided by public accounting firms or other assurance
providers. For example, assurance on corporate responsibility and
circulation.
1-23 a. The vision of the Global Reporting Initiative (GRI) is a sustainable
global economy where organizations manage their economic,
environmental, social and governance performance and impacts
support to organizations.
b. According to the GRI “A sustainability report is a report published
by a company or organization about the economic, environmental,
and social impacts caused by its everyday activities. A
between financial and non-financial performance. An integrated
report also presents the risks and opportunities the company faces,
accordance” report.
1-14
Copyright © 2017 Pearson Education, Inc.
1-24 a. Answers will vary by state. Most states require 150 hours of
education, with specific requirements for number of accounting hours
and credit hours in other subject areas.
b. Answers will vary by state. Many states require one or two years of
work experience gained in public practice, or possibly government,
d. The Elijah Watt Sells award program was established in 1923
by the American Institute of Certified Public Accountants
(AICPA) to recognize outstanding performance on the Uniform
CPA Examination. The award is presented to candidates who
Examination on their first attempt.
e. Passing information is available on the CPA Examination portion of
