CH 1 Questions

CH 1 Questions - ACCOUNTING 403W CHAPTER 1 QUESTIONS 1 The...

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ACCOUNTING 403W CHAPTER 1 QUESTIONS 1) The Enron and WorldCom Scandals had used accounting fraud to significantly overstate its reported income. In addition to these two very visible cases, a record number of public companies restated prior-period financial statements, and almost weekly the SEC announced a new investigation. More significantly, the highly publicized conviction of Andersen LLP, one of the prior “Big 5” firms, was charged of destruction of documents related to the Enron case, which brought into question the ethical principles of the public accounting profession. 2) Assurance services are professional services that enhance the quality of information for decision makers. Many assurance services involve some form of attestation. The two distinct types are: those that increase the reliability of information and those that involve putting information in a form or context that makes decision making easier. 3) The most common type of attestation engagement is an examination (audit). Internal control over financial reporting is most frequently asserted by management on this type of engagement. 4) The principal use and significance of an audit report to a large corporation with securities listed on a stock exchange is that it provides credibility to the information. This means that it can be relied upon by outsiders, such as stockholders, creditors, government regulators, customers, and other interested third parties. 5) A decision by a bank loan officer about whether to make a loan to a business can be used to illustrate the demand for auditing. They need to rely on the financial statements of the company in order to see if they qualify for the loan. Thus, auditing gives the bank loan
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CH 1 Questions - ACCOUNTING 403W CHAPTER 1 QUESTIONS 1 The...

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