Chapter_6_answers_to_review_questions

Chapter_6_answers_to_review_questions - Review Questions...

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Review Questions 6-1 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 flows in conformity with generally accepted accounting principles. The auditor meets that objective by accumulating sufficient appropriate evidence to determine whether the financial statements are fairly stated. 6-3 An error is an unintentional misstatement of the financial statements. Fraud represents intentional misstatements. 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 must 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, material misstatements due to fraud are usually more difficult to uncover than errors. The auditor’s 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. 6-13 The existence objective deals with whether amounts included in the financial statements should actually be included. Completeness is the opposite of existence. The completeness objective deals with whether all amounts that should be included have actually been included. In the audit of accounts receivable, a nonexistent account receivable will lead to overstatement of the accounts receivable balance. Failure to include a customer's account receivable balance, which is a violation of completeness, will lead to understatement of the accounts receivable balance. Discussion Questions And Problems 6-22 a. 1. The function of the auditor in the audit of financial statements is to provide users of the statements with an informed opinion based on reasonable assurance obtained as to the fairness with which the statements portray financial position, results of operations, and cash flows in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding year. 2.
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This note was uploaded on 02/19/2012 for the course ACCOUNTING 320 taught by Professor Rich during the Fall '12 term at Columbia College.

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Chapter_6_answers_to_review_questions - Review Questions...

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