An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing. To explain: The objective of external auditing and failure of Person F to achieve the objective.

Question

For each separate case, state whether the action or situation shows a violation of the AICPACode of Professional Conduct; if so, explain why and cite the relevant rule or interpretation.a. Your client, Contrary Corporation, is very upset over the fact that your audit last yearfailed to detect an $800,000 inventory overstatement caused by employee theft and falsification of the records. The board discussed the matter and authorized its attorneys toexplore the possibility of a lawsuit for damages.b. Contrary Corporation filed a lawsuit alleging negligent audit work, seeking $1 million indamages.c. In response to the lawsuit by Contrary, you decided to bring litigation against certain officers of the company alleging management fraud and deceit. You are asking for a damagejudgment of $500,000.d. The Allright Insurance Company paid Contrary Corporation $700,000 under a fidelitybond covering an inventory theft by employees. Allright is suing your public accountingfirm for damages on the…

Answer 1

Question

Chapter 1, Problem 55FF

a.

To determine

Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.

To explain: The objective of external auditing and failure of Person F to achieve the objective.

B.

To determine

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.

C.

To determine

Introduction: The financial statements indicate the financial performance of a company. It discloses the profits earned and losses occurred by the company during the period and the position of its assets and liabilities at the end of the year.

To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.

D.

To determine

Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.

To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.

E.

To determine

Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.

To explain: The facts in this case related to each of the driver of audit quality.

F.

To determine

Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To state: The Person F & B agreed to conduct the audit in first place.

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Answer 2

Question

Chapter 1, Problem 55FF

a.

To determine

Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.

To explain: The objective of external auditing and failure of Person F to achieve the objective.

B.

To determine

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.

C.

To determine

Introduction: The financial statements indicate the financial performance of a company. It discloses the profits earned and losses occurred by the company during the period and the position of its assets and liabilities at the end of the year.

To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.

D.

To determine

Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.

To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.

E.

To determine

Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.

To explain: The facts in this case related to each of the driver of audit quality.

F.

To determine

Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To state: The Person F & B agreed to conduct the audit in first place.

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Answer 3

Question

Chapter 1, Problem 55FF

a.

To determine

Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.

To explain: The objective of external auditing and failure of Person F to achieve the objective.

B.

To determine

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.

C.

To determine

Introduction: The financial statements indicate the financial performance of a company. It discloses the profits earned and losses occurred by the company during the period and the position of its assets and liabilities at the end of the year.

To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.

D.

To determine

Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.

To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.

E.

To determine

Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.

To explain: The facts in this case related to each of the driver of audit quality.

F.

To determine

Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To state: The Person F & B agreed to conduct the audit in first place.

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Answer 4

Question

Chapter 1, Problem 55FF

a.

To determine

Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.

To explain: The objective of external auditing and failure of Person F to achieve the objective.

B.

To determine

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.

C.

To determine

Introduction: The financial statements indicate the financial performance of a company. It discloses the profits earned and losses occurred by the company during the period and the position of its assets and liabilities at the end of the year.

To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.

D.

To determine

Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.

To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.

E.

To determine

Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.

To explain: The facts in this case related to each of the driver of audit quality.

F.

To determine

Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To state: The Person F & B agreed to conduct the audit in first place.

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Answer 5

Chapter 1, Problem 55FF

a.

To determine

Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.

To explain: The objective of external auditing and failure of Person F to achieve the objective.

B.

To determine

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.

C.

To determine

Introduction: The financial statements indicate the financial performance of a company. It discloses the profits earned and losses occurred by the company during the period and the position of its assets and liabilities at the end of the year.

To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.

D.

To determine

Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.

To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.

E.

To determine

Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.

To explain: The facts in this case related to each of the driver of audit quality.

F.

To determine

Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To state: The Person F & B agreed to conduct the audit in first place.

Answer 6

Chapter 1, Problem 55FF

a.

To determine

Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.

To explain: The objective of external auditing and failure of Person F to achieve the objective.

Answer 7

Chapter 1, Problem 55FF

a.

To determine

Introduction: An organized and independent examination of financial services to express an opinion on financial statements whether such statements as a whole are free from material misstatement and giving a true and fair view of the state of the entity is known as auditing.

To explain: The objective of external auditing and failure of Person F to achieve the objective.

Answer 8

B.

To determine

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.

Answer 9

B.

To determine

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.

Answer 10

C.

To determine

Introduction: The financial statements indicate the financial performance of a company. It discloses the profits earned and losses occurred by the company during the period and the position of its assets and liabilities at the end of the year.

To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.

Answer 11

C.

To determine

Introduction: The financial statements indicate the financial performance of a company. It discloses the profits earned and losses occurred by the company during the period and the position of its assets and liabilities at the end of the year.

To state: The users of Company A’s financial statements and its adverse affect on Person F’s action.

Answer 12

D.

To determine

Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.

To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.

Answer 13

D.

To determine

Introduction: Audit quality is maintained when audit is performed as per the generally accepted auditing standards and gives a reasonable declaration that the financial statements and related disclosures are free from material misstatements and are presented as per the generally acceptable accounting principles.

To state: The skill and knowledge required for quality audit of Company F’s financial statements and failure of individual who actually performed the audit work.

Answer 14

E.

To determine

Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.

To explain: The facts in this case related to each of the driver of audit quality.

Answer 15

E.

To determine

Introduction: Audit quality is maintained when audit is performed in accordance with the generally accepted auditing standards and provides a reasonable assurance that the financial statements and related disclosures are free from material misstatements and are presented in accordance with generally acceptable accounting principles.

To explain: The facts in this case related to each of the driver of audit quality.

Answer 16

F.

To determine

Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To state: The Person F & B agreed to conduct the audit in first place.

Answer 17

F.

To determine

Introduction: An organized and independent examination of financial services to express an on opinion on financial statements whether such statements as a whole are free from material misstatement and gives a true and fair view of the state of the entity is known as auditing.

To state: The Person F & B agreed to conduct the audit in first place.

Answer 18

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Ch. 1 - Prob. 1TFQ Ch. 1 - Prob. 2TFQ Ch. 1 - Prob. 3TFQ Ch. 1 - Prob. 4TFQ Ch. 1 - Prob. 5TFQ Ch. 1 - Prob. 6TFQ Ch. 1 - Prob. 7TFQ Ch. 1 - Prob. 8TFQ Ch. 1 - Prob. 9TFQ Ch. 1 - Prob. 10TFQ

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed. To explain: The requirement of independent audit in financial statements.

Chapter 1 Solutions

Introduction: Auditor’s independence ensures that auditor conducts an audit in a fair manner and as per the established standards and rules without any bias or managerial influence that may affect the work performed.

To explain: The requirement of independent audit in financial statements.