Chapter 01 Ans

CHAPTER 1 INTRODUCTION TO ASSURANCE ENGAGEMENTS I.

Review Questions 1.

Refer to page 2, paragraph 3 of the textbook.

2.

Refer to page 3, paragraph 2 of the textbook.

3.

Refer to page 4, paragraph 2 of the textbook.

4.

In an assurance engagement, a practitioner aims to provide a high or moderate level of assurance that an assertion being made by one party for use by another party can be relied upon while in a consulting engagement, the practitioner aims to provide professional advice on how the limited resources of an enterprise can be put into optimal use in order to attain the company’s objectives.

5.

Examples of assurance engagements on information technology are: a) CPA Web Trust Service b) Information System Reliability Service Refer to page 7 of the textbook for a brief discussion of these services.

6.

Refer to page 10 of the textbook.

7.

Refer to pages 12 to 17 of the textbook.

8.

Refer to page 18, paragraphs 1 and 2 of the textbook.

9.

Refer to pages 15 to 23 of the textbook.

10. Refer to pages 20 to 22 of the textbook. II. Multiple Choice Questions 1. 2. 3. 4.

c a d d

5. 6. 7. 8.

III. Comprehensive Cases

d c d d

9. 10. 11. 12.

d c d c

13. d 14. c

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Solutions Manual - Principles of Auditing and Other Assurance Services

Case 1.

(a) The purpose of CPA reporting on internal control is to provide assurance about whether management’s assertion about internal control is fairly stated in all material respects, based on the control criteria being followed. Thus, for example, an examination provides the highest degree of assurance that information produced by the system will be reliable.

(b) When involved in performing an examination on the effectiveness of internal control a practitioner should: • Plan the engagement. • Obtain an understanding of internal control. • Evaluate the design and operating effectiveness of internal control. • Form an opinion about the fairness of management’s assertion on internal control. Case 2.

(a) PSA 100, Assurance Engagements, provide guidance for an engagement such as one on customer satisfaction. They provide guidelines on audits and related services such as examinations and reviews.

(b) Suitable criteria are those that are objective and permit reasonably consistent measurements. In addition, the criteria must be sufficiently complete such that no relevant factors are omitted that would affect a conclusion about the subject matter. Finally, the criteria must measure some characteristic of the subject matter that is relevant to a user’s decision. (c)

INDEPENDENT ACCOUNTANTS’ REPORT We have examined the accompanying Schedule of Customer Satisfaction Measures for the three years ended December 31, 20X4. This schedule is the responsibility of Gonzales, Inc.’s management. Our responsibility is to express an opinion on this schedule based on our examination. Our examination was conducted in accordance with standards on assurance engagements adopted in the Philippines and, accordingly, included examining, on a test basis, evidence supporting the schedule and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. In our opinion, the Schedule of Customer Satisfaction Measures referred to above presents fairly, in all material respects, the levels of customer satisfaction for the three years ended December 31, 20X4, in conformity with the measurement and disclosure criteria set forth in Note 1.

Introduction to Assurance Engagements

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Santos & Lopez, LLP March 1, 20X5 NOTE TO INSTRUCTOR: If the CPAs believe that the criteria are not understandable by users other than management a paragraph must be added to the report restricting its use.