Auditing and Assurance Services

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CHAPTER 1

Auditing and Assurance Services

LEARNING OBJECTIVES

| | |Exercises and | | | |Problems | | |Review Checkpoints | | | | | | |Define information risk and explain how auditing and assurance services play|1, 2, 3 |48, 51 | |a role in reducing this business risk. | | | | | | | |Define and contrast accounting, auditing, and assurance services. |4, 5, 6, 7, 8 |47 | | | | | |Describe and define the management assertions embodied in financial |9, 10, 11 |49, 53 | |statements, and why auditors use them as a focal point of the audit. | | | | | | | |Explain some characteristics of professional skepticism. |12 | | | | | | |Describe the organization of public accounting firms and identify the |13, 14 |56 | |various services they offer. | | | | | | | |Describe the audits and auditors in governmental, internal, and operational |15, 16, 17, 18 |50, 52, 55 | |auditing. | | | | | | | |List and explain the requirements for becoming a certified information |19, 20, 21, 22 |54 | |professional. | | |

SOLUTIONS FOR REVIEW CHECKPOINTS

1.1Business risk is the collective risk faced by a company that engages in business. It encompasses all threats to and organization’s goals and objectives. It includes the chance that customers will buy from competitors, that product lines will become obsolete, that taxes will increase, that government contracts will be lost, or that employees will go on strike.

1.2The conditions of complexity, remoteness, time-sensitivity, and consequences increase demands by outside users for relevant, reliable (useful) information. They cannot produce the information for themselves because of these conditions. Company managers and accountants produce the information.

1.3Information risk, in contrast to business risk, is the risk (probability) that the information (mainly financial) disseminated by a company will be materially false or misleading. This risk creates the demand for objective outsiders to provide assurance to...
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