AU书本课后答案CH06.docx

1、AU书本课后答案CH06Chapter 6Audit Responsibilities and Objectives Review Questions6-1 The objective of the audit of financial statements by the independent auditor is the expression of an opinion on the fairness with which the financial statements present financial position, results of operations, and cash

2、 flows in conformity with applicable accounting standards. The auditor meets that objective by accumulating sufficient appropriate evidence to determine whether managements assertions regarding the financial statements are fairly stated.6-2 It is managements responsibility to adopt sound accounting

3、policies, maintain adequate internal control and make fair representations in the financial statements. The auditors responsibility is to conduct an audit of the financial statements in accordance with auditing standards and report the findings of the audit in the auditors report.6-3 An error is an

4、unintentional misstatement of the financial statements. Fraud represents an intentional misstatement. The auditor is responsible for obtaining reasonable assurance that material misstatements in the financial statements are detected, whether those misstatements are due to errors or fraud. An audit m

5、ust be designed to provide reasonable assurance of detecting material misstatements in the financial statements. Further, the audit must be planned and performed with an attitude of professional skepticism in all aspects of the engagement. Because there is an attempt at concealment of fraud, materia

6、l misstatements due to fraud are usually more difficult to uncover than errors. The auditors best defense when material misstatements (either errors or fraud) are not uncovered in the audit is that the audit was conducted in accordance with auditing standards.6-4 Misappropriation of assets represent

7、s the theft of assets by employees. Fraudulent financial reporting is the intentional misstatement of financial information by management or a theft of assets by management, which is covered up by misstating financial statements. Misappropriation of assets ordinarily occurs either because of inadequ

8、ate internal controls or a violation of existing controls. The best way to prevent theft of assets is through adequate internal controls that function effectively. Many times theft of assets is relatively small in dollar amounts and will have no effect on the fair presentation of financial statement

9、s, although there are some cases of material theft of assets. Fraudulent financial reporting is inherently difficult to uncover because it is possible for one or more members of management to override internal controls. In many cases the amounts are extremely large and may affect the fair presentati

10、on of financial statements.6-5 True, the auditor must rely on management for certain information in the conduct of the audit. However, the auditor must not accept managements representations blindly. The auditor must, whenever possible, obtain appropriate evidence to support the representations of m

11、anagement. As an example, if management represents that certain inventory is not obsolete, the auditor should be able to examine purchase orders from customers that prove part of the inventory is being sold at a price that is higher than the companys cost plus selling expenses. If management represe

12、nts an account receivable as being fully collectible, the auditor should be able to examine subsequent payments by the customer or correspondence from the customer that indicates a willingness and ability to pay.6-6CHARACTERISTICAUDIT STEPS1. Managements characteristics and influence over the contro

13、l environment. Investigate the past history of the firm and its management. Discuss the possibility of fraudulent financial reporting with previous auditor and company legal counsel after obtaining permission to do so from management.2. Industry conditions. Research current status of industry and co

14、mpare industry financial ratios to the companys ratios. Investigate any unusual differences. Read AICPAs Industry Audit Risk Alert for the companys industry, if available. Consider the impact of specific risks that are identified on the conduct of the audit.3. Operating characteristics and financial

15、 stability. Perform analytical procedures to evaluate the possibility of business failure. Investigate whether material transactions occur close to year-end.6-7 The cycle approach is a method of dividing the audit such that closely related types of transactions and account balances are included in t

16、he same cycle. For example, sales, sales returns, and cash receipts transactions and the accounts receivable balance are all a part of the sales and collection cycle. The advantages of dividing the audit into different cycles are to divide the audit into more manageable parts, to assign tasks to different members of the audit team, and to keep closely related parts of the audit together.6-8GENERAL LEDGER ACCOUNTCY