What are the information and established criteria for the audit of Jones Company’s tax return by an internal revenue agent? What are they for the audit of Jones Company’s financial statements by a CPA firm?

Audits of financial statements

REVIEW QUESTIONS

1-1 (OBJECTIVE 1-1) What are the information and established criteria for the audit of Jones Company’s tax return by an internal revenue agent? What are they for the audit of Jones Company’s financial statements by a CPA firm?

1-2 (OBJECTIVE 1-2) In the conduct of audits of financial statements, it would be a serious breach of responsibility if the auditor did not thoroughly understand accounting. However, many competent accountants do not have an understanding of the auditing process. What causes this difference?

1-3 (OBJECTIVE 1-3) Discuss changes in accounting and business operations over the last decade that have increased the need for independent audits.

1-4 (OBJECTIVE 1-3) Distinguish among the following three factors impacting a loan interest rate: risk-free interest rate, business risk, and information risk. Which one or ones does the auditor reduce by performing an audit?

1-5 (OBJECTIVE 1-4) Identify the three main ways information risk can be reduced. What are the advantages and disadvantages of each?

1-6 (OBJECTIVE 1-4) Explain how the increased use of fair value accounting might increase information risk.

1-7 (OBJECTIVE 1-5) Explain audit services, attestation services, and assurance services, and give examples of each.

1-8 (OBJECTIVE 1-5) Why might an organization seek the assurance of a CPA about information presented in the organization’s corporate sustainability report?

1-9 (OBJECTIVES 1-1, 1-7) Describe the nature of the evidence the internal revenue agent will use in the audit of Jones Company’s tax return.

1-10 (OBJECTIVES 1-6, 1-7) List five examples of specific operational audits that can be conducted by an internal auditor in a manufacturing company.

1-11 (OBJECTIVES 1-5, 1-6) What knowledge does the auditor need about the client’s business in an audit of historical financial statements? Explain how this knowledge may be useful in performing other assurance or consulting services for the client.

1-12 (OBJECTIVE 1-8) Identify the four parts of the Uniform CPA Examination.