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    Sean Gonzales-ACCY41Assignment

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    Sean Gonzales
    The document discusses the purpose and history of financial statement audits. It begins by explaining that the objective of an audit is to obtain assurance that financial statements are free from material misstatements and comply with the relevant accounting framework. It then discusses how the demand for independent audits arose due to concerns about impartiality and the possibility of intentional or unintentional errors in management-prepared financial statements. As companies grew larger during the industrial revolution and relied on capital markets, there was also greater information asymmetry between owners and managers, requiring independent parties to verify the accuracy of financial reports.

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    Sean Gonzales-ACCY41Assignment

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    Sean Gonzales
    11 views3 pages
    The document discusses the purpose and history of financial statement audits. It begins by explaining that the objective of an audit is to obtain assurance that financial statements are free from material misstatements and comply with the relevant accounting framework. It then discusses how the demand for independent audits arose due to concerns about impartiality and the possibility of intentional or unintentional errors in management-prepared financial statements. As companies grew larger during the industrial revolution and relied on capital markets, there was also greater information asymmetry between owners and managers, requiring independent parties to verify the accuracy of financial reports.

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    The document discusses the purpose and history of financial statement audits. It begins by explaining that the objective of an audit is to obtain assurance that financial statements are free from material misstatements and comply with the relevant accounting framework. It then discusses how the demand for independent audits arose due to concerns about impartiality and the possibility of intentional or unintentional errors in management-prepared financial statements. As companies grew larger during the industrial revolution and relied on capital markets, there was also greater information asymmetry between owners and managers, requiring independent parties to verify the accuracy of financial reports.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    11 views3 pages

    Sean Gonzales-ACCY41Assignment

    Uploaded by

    Sean Gonzales
    The document discusses the purpose and history of financial statement audits. It begins by explaining that the objective of an audit is to obtain assurance that financial statements are free from material misstatements and comply with the relevant accounting framework. It then discusses how the demand for independent audits arose due to concerns about impartiality and the possibility of intentional or unintentional errors in management-prepared financial statements. As companies grew larger during the industrial revolution and relied on capital markets, there was also greater information asymmetry between owners and managers, requiring independent parties to verify the accuracy of financial reports.

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    © All Rights Reserved
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    of 3

    Sean Gonzales

    Chapter 1.

    1. The objective of a financial statement audit is to obtain a high level of assurance that financial
    statements are free of material misstatements due to fraud or errors and that they are
    presented in accordance with appropriate accounting framework. External audit intends to
    enhance the confidence that users can place on management-prepared financial statements.
    a. The demand for independent external audit arises from the credibility gap created as it is hard
    to expect management reporting on its own business to be impartial and unbiased. Further,
    there is a possibility for honest but carelessly prepared financial statements that could
    misinform the public. And lastly, the very real possibility that financial statements prepared by
    management have been intentionally falsified to conceal unsavory practices. An independent
    external audit fixes these issues.
    8.
    a. The independent external audit provides assurance to the public that the financial
    statements reported by the company are in fact reliable incentivizing investors to
    transact with the company.
    b. Investors are likely to remain apprehensive of transacting with the company.
    9. Companies in the earlier times were much smaller and required far less accountability to outside
    parties. However, during the industrial revolution, companies grew in size and required a means
    of financing expansions at greater rates. This led to the birth of capital markets which allowed
    companies to sell small pieces of ownership to the public. Due to this, ownership of a company
    could comprise of a large group of individuals not involved the company’s operations. This
    creates asymmetry in the information between those who own the company and those who run
    it. To maintain reliability, individuals independent of both parties were required to ascertain
    whether the information reported to the public was in fact accurate and true free of fraud and
    error.

    Chapter 2

    MCQ

    1. D 6. C 11. D 16. B
    2. C 7. B 12. C 17. B
    3. B 8. A 13. D 18. D
    4. A 9. B 14. C 19. A
    5. D 10 C 15. A 20. C
    .
    Exercise 1

    a. Agreed-upon procedures engagement


    b. Review
    c. Attest Engagement
    d. Audit of Financial Statements
    e. Integrated Audit
    f. Assurance services
    g. Examination

    Exercise 2

    1. CPA accounting
    services
    2. CPA accounting
    services
    3. internal operational
    auditor audits
    4. COA performanc
    e audits
    5. Bank compliance
    examine audit
    r
    6. CPA consulting
    services
    7. internal audits of
    auditor financial
    statements
    8. internal operational
    auditor audits
    9. BIR compliance
    audit
    10. COA audits of
    financial
    statements
    11. COA audits of
    financial
    statements
    12. CPA accounting
    services
    Chapter 3

    1
    . C 6. A
    2
    . A 7. B
    3
    . C 8. D
    4
    . A 9. C
    5 10
    . B . B

    Chapter 4

    1 A 6. B 11 D 16. C 21. C 26. D


    . .
    2 D 7. A 12 B 17. B 22. D 27. A
    . .
    3 D 8. D 13 C 18. D 23. B 28. D
    . .
    4 B 9. B 14 C 19. D 24. C
    . .
    5 C 10 C 15 D 20. B 25. A
    . . .

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