Auditing: A Practical Approach 4th Canadian Edition by Robyn Moroney Test bank
Learning Objective: Explain the different levels of assurance.
Learning Objective: Differentiate between the roles of the preparer and the auditor, and discuss the different firms that provide assurance services.
Section Reference: 1.1 Auditing and assurance defined
Section Reference: 1.3 Different assurance services
Section Reference: 1.4 Different levels of assurance
Section Reference: 1.6 Preparers and auditors
CPA Competency: Audit and Assurance
AACSB: Analytic
64. Outline the reasons for the demand for assurance services.
Answer:
Remoteness – As most users do not have access to the entity under review, this makes it difficult to determine whether the information contained in the report is a fair presentation of the entity and its activities for the relevant period.
Complexity – Most financial statement users do not have the accounting and legal knowledge to enable them to assess the complex accounting and disclosure choices being made by the entity.
Competing incentives – Management may have their own incentives to present the information in a particular light which may help them achieve their own objectives. This may introduce bias in what is being presented.
Reliability – As the information is being depended upon to make important decisions, it is important that the information being presented is reliable
Bloomcode: Comprehension
Difficulty: Easy
Learning Objective: Explain why there is a demand for audit and assurance services.
Section Reference: 1.2 Demand for audit and assurance services
CPA Competency: Audit and Assurance
AACSB: Analytic
65. The main assurance service the general public are familiar with are financial statement audits. Briefly describe the other services that an auditor can provide.
Answer: A compliance audit involves gathering evidence to ascertain whether the person or entity under review has followed the rules, policies, procedures, laws, and regulations with which they must conform.
Performance audits are concerned with the economy, efficiency, and effectiveness of an organization’s activities.
A comprehensive audit may encompass elements of a financial statement audit, a compliance audit, and a performance audit.
Internal audits are conducted to provide assurance about various aspects of an organization’s activities.
Corporate social reporting disclosures include environmental, employee, and social reporting.
Bloomcode: Comprehension
Difficulty: Easy
Learning Objective: Differentiate between types of assurance services.
Section Reference: 1.3 Different assurance services
CPA Competency: Audit and Assurance
AACSB: Analytic
66. Identify the three levels of assurance. Identify the three types of engagements relating to each level of assurance and the expression of opinions that would be provided by the assurance provider
Answer:
| Level of Assurance | Type of Engagement | Expression of Opinion |
| Reasonable | Audit | Positive |
| Limited | Review | Negative |
| None | Agreed-Upon Procedures | None |
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different levels of assurance.
Section Reference: 1.4 Different levels of assurance
CPA Competency: Audit and Assurance
AACSB: Analytic
67. Identify the three types of engagements, the level of assurance each engagement provides, and describe the types of procedures that would be performed for each engagement.
Answer:
Audit Engagement: Provides a high level of assurance (reasonable assurance). Procedures performed to obtain sufficient appropriate evidence include a combination of inspection, observation, confirmation, recalculation, re-performance, analytical procedures, and inquiry.
Review Engagement: Provides limited assurance. Procedures performed to obtain sufficient appropriate evidence include inquiry and analytical procedures.