Dwnload Full Auditing and Assurance Services A Systematic Approach 10th Edition Messier Solutions Manual PDF
Dwnload Full Auditing and Assurance Services A Systematic Approach 10th Edition Messier Solutions Manual PDF
Dwnload Full Auditing and Assurance Services A Systematic Approach 10th Edition Messier Solutions Manual PDF
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CHAPTER 2
THE FINANCIAL STATEMENT AUDITING ENVIRONMENT
2-2 Examples of compliance audits include (1) internal auditors determining whether
corporate rules and policies are being followed by departments within the organization, (2)
an examination of tax returns of individuals and companies by the Internal Revenue
Service for compliance with the tax laws, and (3) an audit under the Single Audit Act of
1984 to determine whether an entity receiving federal assistance is in compliance with
applicable laws and regulations.
Examples of operational audits include (1) an audit by the GAO of the Food and Drug
Administration to determine the efficiency and effectiveness of procedures for introducing
new drugs to the market, (2) internal auditors examining the effectiveness and efficiency
of funds being spent on the entity’s computer resources, and (3) a university hiring an
external auditor to examine the effectiveness and efficiency of student advisory services.
Student answers will likely be less detailed but should capture the general idea of each
2-1
© 2017 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 02 - The Financial Statement Auditing Environment
type of audit.
2-3 During the late 1990s and early 2000s, accounting firms aggressively sought opportunities
to expand their business in nonaudit services such as consulting. This expansion from their
core audit practice, combined with allegations of auditors refusing to challenge
management’s actions, resulted in conflict between regulators and the accounting
profession. Subsequent financial fiascos such as those at Enron, WorldCom, Tyco, and
many others caused investors to doubt the fundamental integrity of the financial reporting
system. Under pressure to restore the public’s confidence, Congress passed the Sarbanes-
Oxley Act and created the PCAOB in 2002.
2-4 The accounting profession’s expansion into new areas, combined with changes in the
overall business environment, resulted in new regulations and guidelines. The scandals of
the late 1990s and early 2000s brought into question the profession’s ability to self-
regulate, resulting in new legislation. While these changes have caused pain and turmoil,
they highlight the essential importance of auditing in our economic system. Ultimately,
the “back to basics” emphasis, along with auditing firms’ renewed focus on thorough and
effective financial statement audits, will likely prove healthy for the U.S. financial
2-2
© 2017 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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