CHAPTER 1: This list below indicated various audits, attestation, and other engagements involving auditors. 1. A report on the effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. 2. An auditor’s report on whether the financial statements are fairly presented in accordance with International Financial Reporting Standards. 3. An engagement to help a company structure a merger transaction to minimize the taxes of the combined entities. 4. A report stating whether the company has complied with restrictive covenants related to officer compensation and payment of dividends contained in a bank loan agreement. 5. A report on the effectiveness of internal controls at a company that provides payroll processing for other companies. 6. An examination report stating whether a company’s statement of greenhouse gas emissions is presented in conformity with standards issued by the World Business Council for Sustainable Development and the World Resources Institute. 7. Evaluating the voting process and certifying the outcome for Rolling Stones Magazine’s “Greatest Singer of All Time” poll. 8. A report indicating whether a governmental entity has compiled with certain government regulations. 9. A review report that provides limited assurance about whether financial statements are fairly stated in accordance with U.S. GAAP. 10. A report about management’s assertion on the effectiveness of controls over the availability, reliability, integrity, and maintainability of its accounting information system. 11. An evaluation of the effectiveness of key measures used to assess an entity’s success in achieving specific targets linked to an entity’s strategic plan and vision. Required a. Explain the relationships among audit services, attestation services, and other assurance and no assurance services provided by CPA’s. b. For each of the services listed above, indicate the type of service from the list that follows. (1) An audit of historical financial statements. (2) An attestation service other than an audit service. (3) An assurance or no assurance service that is not an attestation service. 1-21. Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend James Foley asks, him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.” a. Identify ways in which a financial statement audit adds value for clients. b. List other services other than audits that Czarnecki and Hogan likely provides. c. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that .

1. CHAPTER 1: This list below indicated various audits,
attestation, and other engagements involving auditors.
1. A report on the effectiveness of internal control over
financial reporting as required by Section 404 of the Sarbanes-
Oxley Act.
2. An auditor’s report on whether the financial statements are
fairly presented in accordance with International Financial
Reporting Standards.
3. An engagement to help a company structure a merger
transaction to minimize the taxes of the combined entities.
4. A report stating whether the company has complied with
restrictive covenants related to officer compensation and
payment of dividends contained in a bank loan agreement.
5. A report on the effectiveness of internal controls at a
company that provides payroll processing for other companies.
6. An examination report stating whether a company’s statement
of greenhouse gas emissions is presented in conformity with
standards issued by the World Business Council for Sustainable
Development and the World Resources Institute.
7. Evaluating the voting process and certifying the outcome for
Rolling Stones Magazine’s “Greatest Singer of All Time” poll.
8. A report indicating whether a governmental entity has
compiled with certain government regulations.
9. A review report that provides limited assurance about
whether financial statements are fairly stated in accordance with
U.S. GAAP.
10. A report about management’s assertion on the effectiveness
of controls over the availability, reliability, integrity, and
maintainability of its accounting information system.
11. An evaluation of the effectiveness of key measures used to
assess an entity’s success in achieving specific targets linked to
an entity’s strategic plan and vision.

2. Required
a. Explain the relationships among audit services, attestation
services, and other assurance and no assurance services
provided by CPA’s.
b. For each of the services listed above, indicate the type of
service from the list that follows.
(1) An audit of historical financial statements.
(2) An attestation service other than an audit service.
(3) An assurance or no assurance service that is not an
attestation service.
1-21. Dave Czarnecki is the managing partner of Czarnecki and
Hogan, a medium-sized local CPA firm located outside of
Chicago. Over lunch, he is surprised when his friend James
Foley asks, him, “Doesn’t it bother you that your clients don’t
look forward to seeing their auditors each year?” Dave
responds, “Well auditing is only one of several services we
provide. Most of our work for clients does not involve financial
statement audits, and our audit clients seem to like interacting
with us.”
a. Identify ways in which a financial statement audit adds value
for clients.
b. List other services other than audits that Czarnecki and
Hogan likely provides.
c. Assume Czarnecki and Hogan has hired you as a consultant to
identify ways in which they can expand their practice. Identify
at least one additional service that you believe the firm should
provide and explain why you believe this represents a growth
opportunity for CPA firms.
1-22. There are many types of information that require
assurance. Individually or in groups, identify the following
types of assurance services.
a. Identify three or more assurance services that are likely to be
provided only by public accounting firms.
b. Identify three or more assurance services that are likely to be
provided by assurance providers other than public accounting

3. firms.
c. Identify three or more assurance services that may be
provided by public accounting firms or other assurance
providers.
Chapter 2
2-16. Sara O’Hann enjoyed taking her first auditing course as
part of her undergraduate accounting program. While at home
during her semester break, she and her father discussed the
class, and it was clear that he didn’t really understand the
nature of the audit process as he asked the following questions:
a. What is the main objective of the audit of an entity’s
financial statements?
b. The audit represents the CPA firm’s guarantee about the
accuracy of the financial statements, right?
c. Isn’t the auditor’s primary responsibility to detect all kinds
of fraud at the client?
d. Given the CPA firm is auditing financial statements, why
should they need to understand anything about eh client’s
business?
e. What does the auditor do in audit other than verify the
mathematical accuracy of the numbers in the financial
statements?
2-17. For each of the following procedures taken from the
quality control manual of a CPA firm, identify the applicable
element of quality control from Table 2-3 on page 39.
a. Appropriate accounting and auditing research require
adequate technical reference materials. Each firm professional
has online password access through the firm’s Website to
electronic reference materials on accounting, auditing, tax,
SEC, and other technical information, including industry data.
b. The partners accept responsibility for leading and promoting

4. a quality assurance culture within the firm and for providing
and maintaining a quality assurance manual and all other
necessary practical aids and guidance to support engagement
quality.
c. Each office of the firm shall be visited at least annually by
review persons selected by the director of accounting and
auditing. Procedures to be undertaken by the reviewers are
illustrated by the office review program.
d. Audit engagement team members enter their electronic
signatures in the firm’s engagement management software to
indicate the completion of specific audit program steps. At the
end of the audit engagement file until all audit program steps
have been electronically signed.
e. At all stages of any engagement, an effort is made to involve
professional staff at appropriate levels in the accounting and
auditing decisions. Various approvals of the manager or senior
accountant are obtained throughout the audit.
f. No employee will have any direct or indirect financial
interest, association, or relationship (for example, a close
relative serving a client in a decision-making capacity) not
otherwise disclosed that might be adverse to the firm’s best
interest.
g. Individual partners submit the nominations of those persons
whom they wish to be considered for partner. To become a
partner, an individual must have exhibited a high degree of
technical competence; must possess integrity, motivation, and
judgment; and must have a desire to help the firm progress
through the efficient dispatch of the job responsibilities to
which he or she is assigned.
h. Through our continuing employee evaluation and counseling
program and through the quality control review procedures as
established by the firm, educational needs are reviewed and
formal staff training programs modified to accommodate
changing needs. At the conclusion of practice office reviews,
apparent accounting and auditing deficiencies are summarized
and reported to the firm’s director of personnel.

5. i. All potential new clients are reviewed before acceptance. The
review includes consultation with predecessor auditors, and
background checks. All new clients are approved by the firm
management committee, including assessing whether the firm
has the technical competence to complete the engagement.
j. Each audit engagement must include a concurring partner
review of critical audit decisions.
2-21. International Standards on Auditing (ISAs) are issued by
the International Auditing and Assurance Standards Board
(IAASB). Use the IAASB Web site to learn more about he
IAASB and its standard-setting activities.
a. What is the objective of the IAASB? Who uses International
Standards on Auditing?
b. Summarize the due process followed by the IAASB in setting
standards.
c. How is the IAASB committed to transparency in the standard-
setting process?
d.