Change at DuPont Research Paper Example | Topics and Well Written Essays - 250 words

Change at DuPont - Research Paper Example rooted in observation of the best at present, logically describing future ideals, decision making through collaboration, dialogue, and experimentation for proof. Sense making, on the other hand, utilizes meta-theoretical assumptions analytically to arrive at a workable theory. As a change manager, I would analyze the assumptions from sense making to arrive at a substantive theory that is both logical and effective. Further, I would put this theory to the test to appreciate its attributes from observation and experimentation. Finally, with all the facts, I would invoke a practitioner-driven system of arriving at an intervention that facilitates change. This would prove effective; especially when all the due steps are in place. At the wake of the closure of Orlon plant, I would first halt the process of stopping one project to aid the other. Such rush decisions hurt in the long run. Instead, I would introduce the existing management to new ideas that would aid in the healing process. In this way, the focus could shift from improving the effectiveness of the organization to the plant itself. Further, I would try ensuring that there is a definite mechanism of monitoring and developing the strengths of the plant, call on staff to appreciate the strengths and aid in their development. In addition, motivating the people would go a long way in improving their attitude, productivity and offloading the pressure that comes with

Communicate in a business environment Essay Example for Free

Communicate in a business environment Essay 3.1 Describe ways of verbally presenting information and ideas clearly 3.2 Explain ways of making contributions to discussion that help to move them forward 3.3 Describe methods of active listening 3.4 Explain the purpose of summarising verbal communications 4.1 Describe ways of getting feedback on communications 4.2 Explain the purpose of using feedback to develop communication skills Describe ways of verbally presenting information and ideas clearly to present any information or ideas I need clearly I often use simple language and short sentences this makes it easier for everybody to understand. Also I present the information is a variety of ways as some people understand things and concepts in different ways. For example; some people understand by hearing or seeing. Before I present any information or ideas I always plan out what I want to say, I often also take out any information that is not necessary. I also use active and personal language like ‘’you’ and ‘we’’. Explain ways of making contributions to discussion that help to move them forward To make conversation move forward, I often learn to listen to people and give importance for everybody’s ideas. This way I can make positive contributions that can lead to further discussion. I also often do not make a contribution to a subject who isn’t positive or may not affect me or my work. Describe methods of active listening In order to perform within LSG and to develop my skills listening is one the most important skills I should obtain. As it will portray the quality of my relationship with my team and clients. Listening is important as I need to often obtain information from others to learn new things. Methods of active listening include: Listening calmly without interrupting, so that I let the other person speak and show them that I care and respect them Asking others to repeat if I do not understand anything, in order to avoid mistakes Taking notes of important points, so that I do not forget or miss out on any important points Confirming what I have understood, so that there is no misunderstanding of information Explain the purpose of summarising verbal communications The purpose of summarising verbal communication is to identify major points, behaviours, thoughts and feelings that have been discussed. I then often collate all the information I have collected. By doing this is helps to have a clear precise outline of all communications. Describe ways of getting feedback on communications I believe that feedback completes the entire process of communication. Feedback helps us to decide if the communication was effects and useful. I often get feedback from my line manager Scott or I often get it from clients on the phone. If any feedback given is to improve on anything I often make note of the feedback and make a working progress for myself to include the suggestion in my work. Explain the purpose of using feedback to develop communication skills I use feedback for improve my work performance. It helps improve my work ethnic, team work and quality of my work. To help develop communication skills the feedback has to be received and acted upon. Once I have acted upon feedback I always let my line manager Scott know so that he can see I am willing to learn and enthusiastic and this may encourage people to offer me feedback in the future.

Problems And Solutions Of Urbanization Environmental Sciences Essay

Problems And Solutions Of Urbanization Environmental Sciences Essay The meaning of urbanization can be basically described as the expansion of cities by encompassing the rural areas in it. Urbanization is not just physically growth. Also, it contains population and social and economic structure. The urban growth generally has been caused by immigrations. Most of these immigrations are done from rural areas to urban areas. Sometimes it can be seen from countries to countries. The reasons of migration can be arranged as economic, technologic and sociological. The urbanization has positive sides as well as negative. The major advantage of urbanization is economic development. The cities supply more facilities to its citizens with huge amount of technological equipments. On the other hand, negative sides follow the technological and economical development. All forms of pollution increase together with growth of population. Traffic congestion also starts to seen in the developed countries. Housing problems accrue due to population access from rural areas to urban areas. The whole of society is affected by urbanization. All of these negative sides can be arranged as the problems of urbanization. The problems of urbanization need to be addressed. In this developing world, nobody can stop the growth of population. However, if urban areas could be developed with a good method like sustainability, the problems of urbanization would be solved. Sustainability means the ability of sustain something. In other words, think of the future and make a plan. The aim of it is prevent some problems which will be faced in the future. If the cities are developed regarding to policy of sustainable development, the problems of urbanization can be met. In the last centuries, the urbanization had been got an uncontrolled phase. The huge amounts of people migrate to cities from rural areas. There are several causes of it. The major causes of urbanization can be arranged as economic, technologic, politic and psycho-sociological. People, who have been living in the rural areas, tend to migrate to cities because of economic factors. Specially, in the developed countries, there is vast amount of difference between peasant`s income and civicsà ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒ ¢Ã¢â‚¬Å¾Ã‚ ¢ income. So, the people who have been living in the rural areas immigrate to cities to increase their incomes. Besides, people immigrate to live more comfortable and for education. Firstly, population problem arises in urbanization. The balance of the population between rural areas and cities starts to grow up. While the cities are expanding, the farmland starts to destroy. In the rural areas, life is more difficult than the life, in the cities. Transportation, communication, technological needs are always difficult to benefit in the rural areas. Therefore, people spread towards cities. All types of pollution can be seen easily in the urbanization. Air pollution, water pollution, noise pollution, light pollution and solid product waste are the main pollutions which are increased parallel to urbanization. Because of the population growth, the air quality decreases in the urban areas. The trucks, cars, factories always exhaust a huge amount of carbon dioxide in a day to the air. The number of truck, car, and factory are raised parallel to people population. As population growth in cities, the demand of clean water increase. Sometimes the local authority cannot supply enough clean water to citizen due to high population. So, the water pollution occurs in the urban areas. The other pollution is noise pollution. In our daily life everybody use their cars, especially in the cities, car noise is the simplest example for noise pollution. The noise could be created by cars, people, factories, construction sites. Because of noisy environment, people have been less fertile and uncreative in their professional life. Again, all of them are connected with population growth. Light pollution causes to loss of electricity energy as well as environmental pollution. This also creates a problem for the future. By using more energy to use lights, the sources for electricity go down. This is the main problem of urbanization, unsustainable development. In the developing countries, solid product waste is another problem in the recent years. High population always need more supply. Sanitation should be always kept on high for public health. Whole pollutions act a very important role in human life. Pollution creates different type of disasters. According to P.S. Brandon, P.L. Lombardi V. Bentivegna (1997, p. 134) China is one of the cities which is faced with environmental degradation, in the world. Environmental degradation covers both its air and water. To improve this environmental degradation governments develop some strict laws. Water pollution, air pollution, noise pollution and the other environmental degradations can be met by policy of environmental protection law. The other problem which occurs in the cities because of urbanization is traffic congestion. Using a private car has become very common in the world. Everybody prefers to use their cars to simply their life. It seems especially in the urbanization countries. This attitude creates traffic congestion. Besides, with this problem, it causes more energy usage, time loss and makes people nervous. To decrease the traffic congestion, the governments find some possible solutions. Public transportation is the most common solution to prevent traffic congestion. The developing cities should produce more sustainable products, vehicles, buildings to save more energy for future generations. According to S. M. Wheeler and T. Beatley (2004, p.98) to prevent the traffic congestion, traffic calming is the process of slowing down traffic to create safer, conductive to pedestrians, cyclists and residential life. With this alternative solution, the air and noise pollution will be decreased. Also, the fuel consumption will be reduced. The cities will be more sustain by traffic calming method. Energy will be saved by this way. Roads will be used safely. Briefly, this method will be solved one of this urbanization problem, traffic congestion. As list of my essay, third problem of the urbanization is housing. Because of large amount of migrants, housing problem has been increasing day to day in cities. The migrants who migrate from rural areas to cities create a problem. These migrants try to find suitable accommodation for them. Unfortunately, due to the low income of migrants, it is impossible to find an accommodation by reasonable price. There are large amount of flats, houses and buildings to live in cities. However, the accommodation price is large as well as amount of accommodation. People start to live unsuitable buildings in cities after migration. The migrants hold old and inconvenient accommodation to survive their life. This creates another problem, which is called visual pollution. Besides, several diseases can easily spread into cities. According to Mark, Gordon, Peter Ron (2007, p. 362) groups of buildings or building stocks is the useful method to over to the management of social housing stock. The governme nts have some policy to over to the management of social housing stock. If policy of housing always applies, the housing problem can be solved by this policy. Fourthly, suffering of societies can be counted as a problem of urbanization. Urbanization effect on societies is the other problem. Fundamentally, this problem is the result of other problems, pollution, traffic congestion and housing. Because of these problems, peoples` welfare goes down. The societies feel bed. This problem can be solved after other problem`s solutions. As a result of, urbanization is created by people and can be solved again by people. The main reason of urbanization is unbalanced income between peasant and civic. In the other worlds, urbanization is expansion of cities and contraction of farmland. According to Philip M. Hauser Leo F. Schnore (1967, p. 1) the reasons to emergence of cities are the size of total population, the control of natural environment, technological development and developments in social organization. The major triggering factor of developing cities is technology. Technology should be used correctly. Even if cannot be used correctly or without caring future, it cause some problems such as urbanization. Urbanization has lots of negative sides. In case, urbanization control by policy of sustainable development. The brief meaning of sustainable development is deliberate developing. The problems which occur due to urbanization can be solved with caring future. And developing some rules or policies by governments will prevent problems of urbanization. For example, to prevent the environmental pollution that contains air pollution, water pollution, noise pollution, visual pollution and solid wastes can be decreased by making lawful to sustainable development. On the other hand, increasing the number of public transportation with reasonable price can raise the demand of using public transportation. Besides, the fuel consumption, noise and air pollution can be solved by this way. Also, traffic congestion can be solved by developing the infrastructure of transportation facilities. For the other problem, housing problem, governments can apply strict rules to prevent housing problems which is occur because of immigrations from rural areas to cities. If all these problems are solved, automatically, the last problem, effect of urbanization on societies can be disappeared.

The Discipline Of Human Geography

The Discipline Of Human Geography Geographical knowledge has a long history in human development. Throughout the history of geography, it mostly involved developing knowledge of the physical features of the world but this history is itself a kind of presentation of human history. In the 19th Century, geography became formally regarded as a discipline, and human geography became established as an essential branch of the natural science; it refers to both geographical information and human activities, i.e. it includes both human geography and physical geography (Johnston, 2000). This essay firstly discusses the meaning of the discipline human geography. Following this, it describes how human geography relates to development. Subsequently, it assesses the key themes/issues relevant to development as explored by scholars, and studies the research techniques used by researchers in this discipline. Finally, it gives an example of a published piece of work stating how it is relevant to our understanding of contemporary deve lopment. 1 The discipline of human geography Geography can be divided into two major parts: physical and human. Both are branches of natural science, which encompass the study of the living world. Physical geography mainly deals with the processes of the atmosphere, biosphere and ecosphere, whereas human geography studies people, culture, population distributions, the urban environment, etc. It studies many cultural aspects and how they relate to their environment as well as why people migrate and how this impacts on their culture. Human geography is special in that the findings of the study of human geography may vary over time. 2 Human geography and development Marston et al. (2005) referred to human geography as incorporating several sub-disciplines, such as globalization, urbanization, the environment and migration. These are interrelated as the condition of one of these can be reflected in the development of another. Human geography discusses the profound interaction of cultural, environmental and social evolution, and considers the views that societies adopt in addressing these issues (Robinson, 2006). Thus, the core of human geography engages directly with change and development, but can be extended to deal with the economic, social, institutional and environmental dimensions of sustainability. Development can present diverse patterns, each with its own characteristics, as the different aspects of development, i.e. culture, economy and politics vary all the time. We can consider all these changing patterns as the results of development. The factors in development interact with each other, and change in one field can affect another or lead to changes elsewhere. Development transforms peoples lives, and as a result, development gradually alters human geography, particularly the aspects of human lifestyle, the political environment, the economic situation and even nature. Thus, the human geography of a place is its phylogeny, and that is how human geography relates to development. 3 Key themes/issues relevant to development Human geography is an incomplete discipline without considering development, to which there are various branches, such as culture, economics, politics, health and history. However, we will discuss these aspects under the headings generally adopted by researchers, as below. 3.1 Culture Culture is the norms and practices of people in particular places, and it encompasses language. It also reflects the region of settlement and other phenomena that may change or remain consistent. The first traces of the study of various cultures in different regions appeared in early 20th Century. At that time, the study of culture study was considered as an alternative to environmental determinism, which argued that human beings and societies are determined by their environment. It focuses on describing and analyzing the ways language, religion, economy, government, and other cultural phenomena vary or remain constant from one place to another and on explaining how humans function spatially (Jordan-Bychkov, et al 1994). Culture is a profound condition and is related to a region, and it has a significant impact on regional development. On the other hand, development can greatly affect cultural norms. The interaction of culture and development is just one aspect of human geography. 3.2 History History is the study of a wide variety of topics, including physical, theoretical, human, fictional and real geographies as well as the past. Historical geography mainly discusses how a place or region changes through time, how people interact with their environment and how the cultural landscape is created. In essence, human history is the phylogeny of people, while human geography is the study development. 3.3 Globalization Globalization is the process of worldwide integration derived from the interplay of world views, products, ideas and aspects of culture. It reveals the interchange of social and cultural forces, including economics, politics and religion. The Economics, politics and religion play an important role in the development of a region. (Al-Rodhan, R.F. Nayef and GÃ ©rard Stoudmann. 2006) Furthermore, the regional conditions of these factors are products of development. Advances in telecommunications, transportation and Internet business are key factors of globalization, and so development involves, in particular, industrial progress and national or international trade, and studying the close relationship between the environment, the economy and real estate. Trade is the exchange goods and services, and the ensuing economic development can improve the standard or quality of life; real estate is a reflection of the extent of urbanization. Therefore, only with all these developmental aspects can globalization become realized. 3.4 Migration Migration is the movement of people from one region or country to another, where they are not locals but settle there. Economic migrants generally seek better education, job opportunities, life conditions and so on; the status of development in the home nation/region is the most crucial factor in immigration. Political migrants generally seek freedom from oppression. Some migration is based on other, more personal reasons, and may be the product of culture and tradition. Immigrants can bring new changes and such interplay or intercommunication partly contributes to the evolution of human geography. 3.5 Urbanization Urbanization is the development of cities, and many rural migrants concentrate in cities, resulting in the physical growth of the urban environment. The structure and experiences of the urban landscape are crucial to human geography. Urbanization is closely linked to modernisation, industrialisation and the sociological process of rationalisation. During the process of development, cities and towns grow, and urban population around the world have been soaring. Urbanization is not just a social phenomenon; rather, it is a historic reform of human behaviour on a worldwide scale. The rapid growth of some big cities, such as Chicago in the 19th Century and Tokyo in the 20th Century, is largely the result of rural-urban migration; it is commonplace in developing countries. People living in cities can take advantage of diversity, proximity and competition in the marketplace. With all these factors, the urban environment can develop rapidly. 3.6 Environment Environment is a subfield of human geography and a reflection of development. Specifically, transformation of the environment is a result of physical and biological factors caused by the interactions of culture, customs, politics, industry and other aspects, i.e. development. Being part of human geography, the environment changes during the development process, and these changes also affect human geography. 4 Research techniques used in human geography 4.1 Social surveys Social survey is a crucial method in obtaining human geography information. The object of the study of human geography is to comprehend the social environment, and in this, social investigation is key to understand the cultural landscape and social phenomena clearly, scholars use social investigation as a means of collecting information and opinions relating to particular social events or trends. To garner the views and thoughts of people, researchers can conduct surveys among the target population. Social surveys also entail consulting historical data or other materials to develop a picture of change, and thus, through social investigation, we can understand both the past and present ages better. 4.2 Document collection Documents represent a priceless treasure of human history and geography, and can reveal the experiences and the scientific and technological achievements of ourselves and our predecessors. Current documents can be classified as paper and non-paper materials. Paper materials often refer to books, journals, reports and other data sources, from which people can gain knowledge of human geography. Non-paper materials mean the Internet, where researchers can access knowledge mostly relating to the present era. Searching on-line libraries or particular website-based information resources can assist in gathering a great deal of information quickly. With the development of science and technology, the means of document collection will become more diversified. 4.3 Exploiting data sources Our predecessors left much precious information about human geography. We contemporary people can gather these materials together, assess them, compare them and draw conclusions from them. As a result, we can learn of the development of human geography. Examining historical data can help us understand the differing features of human geography in different regions. Through assessing the differences between historical and current data, researchers can determine how people, culture, economics, politics and other factors have varied over time, i.e. what changes have occurred in a location, what kinds of inhabitants have ever lived there and what traditions they had and have. All the information can be found through careful organization and collation of the data. These methods are different from but complementary to surveys and document collection, but involve a great deal of effort in handling the data. 4.4 Spatial analysis Spatial analysis can be used in complex cases, and involves defining the varying spatial locations of the entities being studied. Applied to human geography, spatial data analysis can reveal population distribution patterns, the densities of structures at the human scale and spatial population dynamics. The characteristics of these issues are constantly changing in line with human development. Scholars often establish models by using spatial data to analyse the factors that impact on population distribution, etc. Spatial analysis contributes to assisting a deeper comprehension of the features of human geography, taking a spatial overview of the dynamics of population structures resulting from development. 4.5 Interviews Interviewing stems from the desire to know more about the people around us and to better understand how the people around us view the world we live in.(Seidman,1998) Thus, interviewing is most effective when the goal of the given research is to gain insight into the subjective understanding of those around us. In the past, it was uncommon to use interview as a method to study human geography. Gradually, researchers realized the importance of peoples social background, education, cultural and traditional norms in decision-making. Only through interviewing special groups of people can researchers identify the factors that influence behaviour. In underdeveloped regions, people there may not be literate, and so interview is the best method for obtaining first-hand materials to study their history and culture. Not only can researchers learn about specific events in development, they can also gain insight into peoples interior experiences, specifically how people perceive their world and h ow they interpret their perceptions, and how events are affected by their thoughts and feelings. In this, researchers can understand the process of an event instead of what just happened and how the subjects reacted to it. 5 One example illustrating how human geography is relevant to development An article entitled Progress in Human Geography by (Radcliffe 2004) discusses the evolution of human geography, and argues that global networks and human rights are related to this discipline because it is now clear that these two factors have a great impact on national development. This is just one example of many, telling us that the development of one country is inextricably linked to human geography. Conclusion Human geography is a representation of economic, political and historical development, and it examines the interplay between people and the built, rather than the natural, environment (although environmental impacts are considered). The interaction of a wide variety of factors drives human history to move on, as people seek to improve their lives and raise their living standards. A multitude of changes have occurred and will continue to occur as human behaviour changes, resulting complex contemporary societies in which cultures and identities are transformed. Thus human geography is the study of the change, formation and transformation of people and nations over time, or the taking of snapshots of particular human events, behaviours or activities.

The play A View from the Bridge is set in the 1940’s in a place called :: English Literature

The play A View from the Bridge is set in the 1940’s in a place called Red Hook in America. Arthur Miller is the writer of this play ‘A View from the Bridge’ The play ‘A View from the Bridge’ is set in the 1940’s in a place called Red Hook in America. Arthur Miller is the writer of this play and he has been quoted as saying that this play is based on a lot of his own personal experiences. The culture of Red Hook is a mixture of the newly formed American culture and the Sicilian culture, which has come through immigrants being brought here from Sicily. The main characters in the play are Eddie Carbone, who is a long shoreman, his wife Beatrice, their niece Catherine who is adopted, and there are Beatrice’s two cousins, called Marco and Rodolfo, who are illegal immigrants from Sicily, looking for work in America. Beatrice and Eddie are both American citizens, and were born in America, but their grandparents were from Sicily. Catherine has been raised and brought up by Beatrice and Eddie since she was a young child and Eddie has grown attached to her and is very protective of her due to his incestuous attraction to her. Alfieri is a lawyer from an Italian American background and has lived in Red Hook since he was 25. Alfieri has a dual role in the play. He speaks directly to the audience and he reminds the audience of things that have happened in the play, plus he is also a character involved in the action of the play. Alfieri introduces the themes that run through the play. In Alfieri’s opening speech he uses the words â€Å"watched it run its bloody course† as if he knows something bad is going to take place in the play, a tragedy. Alfieri also points out that there is a difference between the modern American law and the ancient law of the Sicilian justice because â€Å"the law has not been a good idea since the Greeks were beaten† and the â€Å"justice is very important here†¦Ã¢â‚¬ ¦Ã¢â‚¬  these quotes are showing how the people are connected to Sicilians from their past. It is important for Alfieri to be a character as well as the narrator in the play because as the narrator he comes in to speak directly to the audience and keep us interested in what is happening. As a character in the play, he is important because he talks to Eddie and tries to help him, because he understands him. He gives the audience insights into Eddie’s character. The play A View from the Bridge is set in the 1940’s in a place called :: English Literature The play A View from the Bridge is set in the 1940’s in a place called Red Hook in America. Arthur Miller is the writer of this play ‘A View from the Bridge’ The play ‘A View from the Bridge’ is set in the 1940’s in a place called Red Hook in America. Arthur Miller is the writer of this play and he has been quoted as saying that this play is based on a lot of his own personal experiences. The culture of Red Hook is a mixture of the newly formed American culture and the Sicilian culture, which has come through immigrants being brought here from Sicily. The main characters in the play are Eddie Carbone, who is a long shoreman, his wife Beatrice, their niece Catherine who is adopted, and there are Beatrice’s two cousins, called Marco and Rodolfo, who are illegal immigrants from Sicily, looking for work in America. Beatrice and Eddie are both American citizens, and were born in America, but their grandparents were from Sicily. Catherine has been raised and brought up by Beatrice and Eddie since she was a young child and Eddie has grown attached to her and is very protective of her due to his incestuous attraction to her. Alfieri is a lawyer from an Italian American background and has lived in Red Hook since he was 25. Alfieri has a dual role in the play. He speaks directly to the audience and he reminds the audience of things that have happened in the play, plus he is also a character involved in the action of the play. Alfieri introduces the themes that run through the play. In Alfieri’s opening speech he uses the words â€Å"watched it run its bloody course† as if he knows something bad is going to take place in the play, a tragedy. Alfieri also points out that there is a difference between the modern American law and the ancient law of the Sicilian justice because â€Å"the law has not been a good idea since the Greeks were beaten† and the â€Å"justice is very important here†¦Ã¢â‚¬ ¦Ã¢â‚¬  these quotes are showing how the people are connected to Sicilians from their past. It is important for Alfieri to be a character as well as the narrator in the play because as the narrator he comes in to speak directly to the audience and keep us interested in what is happening. As a character in the play, he is important because he talks to Eddie and tries to help him, because he understands him. He gives the audience insights into Eddie’s character.

Women in Shakespeares Sonnet 130 Essay -- Sonnet 130 Shakespeare Wome

Women in Shakespeare's Sonnet 130 Shakespeare is expressing, though not in the first person, that he knows women are not the perfect beauties they are portrayed to be and that we should love them anyway. He uses two types of descriptions, one of their physical beauty and the other of their characteristics to make fun of all those ‘romantic’ poets trying to ‘brown nose’ the girls they like. One of the physical attributes, in the first quatrain, that he mentions is his â€Å"mistress’ eyes are nothing like the sun,† meaning she has no ‘twinkle’ in her eyes. In the first quatrain, he also speaks of coral as being â€Å"far more red† than the lips of his mistress; this is a use of imagery to show her non-beauty. He also recognizes that there are â€Å"no such roses† on her cheeks in the second quatra...

Solution to Auditing and Assurance Service: 1,12,B, 3

SOLUTIONS FOR REVIEW CHECKPOINTS 1. 1Business risk is the collective risk faced by a company that engages in business. It encompasses all threats to and organization’s goals and objectives. It includes the chance that customers will buy from competitors, that product lines will become obsolete, that taxes will increase, that government contracts will be lost, or that employees will go on strike. 1. 2The conditions of complexity, remoteness, time-sensitivity, and consequences increase demands by outside users for relevant, reliable (useful) information. They cannot produce the information for themselves because of these conditions. Company managers and accountants produce the information. 1. 3Information risk, in contrast to business risk, is the risk (probability) that the information (mainly financial) disseminated by a company will be materially false or misleading. This risk creates the demand for objective outsiders to provide assurance to decision makers. 1. 4Students can refer to the AAA and AICPA definitions in Chapter 1. Some instructors may want to extend the consideration of definitions to include the internal and governmental definitions (located in Module D). In response to â€Å"What do auditors do? ,† students can refer to Exhibit 1. 2 and respond in terms of: (1) obtaining and evaluating evidence about assertions management makes about economic actions and events, (2) ascertaining the degree of correspondence between the assertions and the appropriate reporting framework, and (3) providing an audit report (opinion). Students can also respond more generally in terms of â€Å"lending credibility† to financial statements presented by management (attestation). 1. An attest engagement is: â€Å"An engagement in which a practitioner is engaged to issue or does issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party. † To attest means to lend credibility or to vouch for the truth or accuracy of the statements that one party makes to another. The attest function is a term often applied to the activities of independent CPAs when actin g as auditors of financial statements. 1. Assurance engagements are independent professional services that improve the quality of information, or its context, for decision makers. Since information (financial statements) are prepared by managers of an entity who have authority and responsibility for financial success or failure, an outsider may be skeptical that the information is objective, free from bias, fully informative, and free from material error, intentional or inadvertent. The services of an independent-CPA auditor helps resolve those doubts because the auditor’s success depends upon his independent, objective, and competent assessment of the information (e. . , the conformity of the financial statements with the appropriate reporting framework). The CPA’s role is to lend credibility to the information; hence the outsider will likely seek his independent opinion. 1. 7CPAs serve as independent intermediaries who lend credibility to information. Hence, assuranc e services are natural extensions of the well-regarded audit and attest services. CPAs can use their expertise in internal control and measurement methods. Assurance services are natural extensions of attestation services, which earlier evolved from financial statement audit services. Attestation and audit services are highly structured and intended to be useful for large groups of decision makers (e. g. , investors, lenders). On the other hand, assurance services are more customized and intended to be useful to smaller, targeted groups of decision makers. In this sense, assurance services bear resemblance to consulting services. 1. 8There are four major elements of the broad definition of assurance services: Independence. CPAs want to preserve their attestation and audit reputations and competitive advantages by preserving integrity and objectivity when performing assurance services. Professional Services. Virtually all work performed by CPAs is defined as â€Å"professional services† as long as it involves some element of judgment based in education and experience. Improving the Quality of Information or its Context. The emphasis is on â€Å"information†Ã¢â‚¬â€œ CPAs’ traditional stock in trade. CPAs can enhance quality by assuring users about the reliability and relevance of information, and these two features are closely related to the familiar credibility-lending products of attestation and audit services. â€Å"Context† is relevance in a different light. For assurance services, improving the context of information refers to improving its usefulness when targeted to particular decision makers in the surroundings of particular decision problems. For Decision Makers. They are the â€Å"consumers† for assurance services, and they personify the consumer focus of new and different professional work. They may or may not be the â€Å"client† that pays the fee, and they may or may not be one of the parties to an assertion or other information. The decision makers are the beneficiaries of the assurance services. 1. Accountants record, classify, and summarize (report) a company’s assets, liabilities, capital, revenue, and expense in financial statements. Auditors gather evidence related to the assertions management makes in financial statements and render a report. Accountants produce the financial statements; auditors audit them. 1. 10There are three major classifications of ASB assertions with several assertions in each c lassification: Transaction Assertions: Occurrence assertion: The objective is to establish with evidence that transactions giving rise to assets, liabilities, sales and expenses actually occurred. Key questions include â€Å"Did the recorded sales transactions really occur? † Completeness and cutoff assertion: The objective is to establish with evidence that all transactions of the period are in the financial statements and all transactions that properly belong in the preceding or following accounting periods are excluded. Completeness also refers to proper inclusion in financial statements of all assets, liabilities, revenue, expense and related disclosures. Key questions related to completeness include: â€Å"Are the financial statements (including footnotes) complete? and â€Å"Were all the transactions recorded in the right period? † Accuracy assertion: The objective is to establish with evidence that transactions have been recorded at the correct amount. Key questions relate to â€Å"where the expenses recorded at the proper dollar amount? † Classification assertion: The objective is to establish with evidence that transactions were posted to the cor rect accounts. Key questions relate to â€Å"was this expense recorded in the appropriate account/† Balance Assertions: Existence assertion: The objective is to establish with evidence that balance represents assets, liabilities, sales, and expenses that are real and in existence at the balance sheet date. Key questions relate to â€Å"does this number truly represent assets that existed at the balance sheet date? † Rights and obligations assertion: The objectives related to rights and obligations are to establish with evidence that assets are owned (or rights such as capitalized leases are shown) and liabilities are owed. Key questions related to this assertion include: â€Å"Does the company really own the assets? nd â€Å"Are related legal responsibilities identified? † Completeness assertion: The objective is to establish with evidence that all balances of the period are in the financial statements. Key questions related to completeness include: â€Å"Are the financial statements (including footnotes) complete? † Valuation assertion: The objective is to establish with evidenc e that balances have been valued correctly. Key questions include â€Å"Are the accounts valued correctly? † and â€Å"Are expenses allocated to the period(s) benefited? † Presentation and Disclosure assertion: Occurrence assertion: The objective is to establish with evidence that transactions giving rise to assets, liabilities, sales and expenses actually occurred. Key questions include â€Å"are we properly presenting and disclosing transactions that occurred during this period. Rights and obligations assertion: The objectives related to establishing with evidence the proper presentation of assets, liabilities, revenues and expenses to which the company has a legal right or a legal obligation Key questions related to this assertion include: â€Å"Has the company properly presented the assets in its possession? nd â€Å"Are related legal responsibilities identified and properly disclosed? † Completeness assertion: The objective is to establish with evidence that all balances of the period are presented and/or disclosed in the financial statements. Key questions related to completeness include: â€Å"Are the financial statements (including footnotes) complete? † Accuracy and valuation assertion: The objectives are to establish with evidence that balances presented and disclosed in the financial statements have been recorded accurately and have been valued correctly. Key questions include â€Å"Are the accounts valued correctly? † and â€Å"Are expenses allocated to the period(s) benefited? † Classification and understandability assertion: The objective is to establish with evidence that presentation and disclosures are properly classified on the financial statements and that financial statements including footnotes are understandable to the financial statement users. Key questions relate to â€Å"Is this account properly presented in the correct financial statement category† and â€Å"are the footnote disclosures presented to promote an understanding of the nature of the account† . 11The ASB’s assertions are important to auditors because they are the focal points for audit procedures. Furthermore, audit procedures are the means to answer the key questions posed by management’s assertions. The ASB assertions are in more detail than the PCAOB assertions and are categorized into transaction assertions, bala nce assertions, and presentation and disclosure assertions. They include the following additional assertions: cutoff, accuracy, valuation, classification, and understandability. Exhibit 1. 4 explains the difference between ASB and PCAOB assertions. . 12Holding a belief that a potential conflict of interests always exists causes auditors to perform procedures to search for errors or frauds that would have a material effect on financial statements. This tends to make audits more extensive for the auditor and more expensive for the client. The situation is not a desirable one in the vast majority of audits where no errors or frauds exist. However, errors and financial reporting frauds have happened too often. Users of financial statements and audit reports expect auditors to detect material misstatements. . 13Some examples of assurance engagements include: †¢ Internet Website certification (CPA WebTrust) †¢ Accounts receivable review and cash enhancement †¢ Third-party r eimbursement maximization †¢ Rental property operations review †¢ Customer satisfaction surveys †¢ Benchmarking/best practices †¢ Evaluation of investment management policies †¢ Fraud and illegal acts prevention and deterrence †¢ Information systems security reviews (SysTrust) †¢ Internal audit strategic review . 14Major areas of public accounting services: †¢ Assurance services (including audit services and other attestation engagements) †¢ Tax consulting services †¢ Consulting services 1. 15Operational auditing is the study of business operations for the purpose of making recommendations about the economic and efficient use of resources, effective achievement of business objectives, and compliance with company policies. The AICPA views operational auditing as a type of management advisory service offered by public accounting firms. 1. 6The elements of expanded-scope auditing include: (1) financial and compliance audits, (2) economy and efficiency audits, and (3) program results audits. 1. 17Compliance auditing involves a study of an organization’s policies, procedures, and performance in following laws, rules, and regulations. An example is a school’s policies, procedures, and performance in determining eligibility for a free meal program. 1. 18Other kinds of auditors include IRS agents/auditors, state and federal bank examiners, state insurance department auditors, and fraud auditors. 1. 9The purpose of continuing education is to ensure that CPAs in practice maintain their expertise at a sufficiently high level in light of evolving business conditions and new regulations. For CPAs in public practice, 120 hours of continuing education is required every three years, with no less than 20 hours in any one year. For CPAs not in public practice, the general requirement is 120 or fewer (90 in some states) every three years. 1. 20Everything cannot be learned in the classroom, and some on-the-job experi ence is helpful before a person is foisted off on the public as a licensed professional. Also, the experience weeds out some persons who do not want to take the trouble to be involved in accounting work. 1. 21State boards administer the state accountancy laws. State boards make physical arrangements to give the CPA examination, collect the examinations, receive the grades from the AICPA grading activity, and notify candidates whether they passed or failed. After satisfying state requirements for education and experience, successful candidates are awarded the CPA certificate by a state board. At the same time, new CPAs must pay a fee to obtain a state license to practice. Thereafter, state boards of accountancy regulate the behavior of CPAs under their jurisdiction (enforcing state rules of conduct) and supervise the continuing education requirements. 1. 22After becoming a CPA licensed in one state, a person can obtain a CPA certificate and license in another state. The process is known as reciprocity. CPAs can file the proper application with another state board of accountancy, meet the state’s requirements, and obtain another CPA certificate. Many CPAs hold certificates and licenses in several states. From a global perspective, individuals must be licensed in each country. Similar to CPAs in the United States, â€Å"Chartered Accountants† (CAs) practice in Australia, Canada, Great Britain, and India. Efforts are currently underway through NASBA to streamline the reciprocity process so that CPAs can practice across state lines without having to have 50 different licenses. SOLUTIONS FOR MULTIPLE CHOICE-QUESTIONS 1. 23a. IncorrectThis is an attestation to the prize promoter’s claims. b. IncorrectThis is an audit engagement to give an opinion on financial statements. c. IncorrectThis is an assurance engagement on newspaper’s circulation data. . IncorrectThis is an assurance engagement on the performance of golf balls. e. CorrectSince attestation and audit engagements are subsets of assurance engagements, all are assurance engagements. 1. 24a. CorrectThis statement characterizes professional skepticism. b. Incorrectâ€Å"Exclusively an auditor† is not an idea that seems to speak of â€Å"skepticism. † c. IncorrectProfessio nal obligations† is not an idea that seems to speak of â€Å"skepticism. † d. IncorrectThis is more an assumption of necessity than of skepticism. 1. 25a. Incorrect While work on a forecast is covered by the attestation standards, the auditors should give assurance or a disclaimer. b. Correct This is the basic definition of attestation–giving a report on reliability of an assertion one party makes to another. c. Incorrect Tax work is not an attestation service. d. Incorrect Litigation and expert witness services are not attestation services. 1. 26a. IncorrectThe objective of environmental auditing is to help achieve and maintain compliance with environmental laws and regulations and to help identify and correct unregulated environmental hazards b. IncorrectThe objective of financial auditing is to obtain assurance on the conformity of financial statements with generally accepted accounting principles. c. Incorrect The objective of compliance auditing is the entity’s compliance with laws and regulations. d. CorrectOperational auditing refers to the study of business operations for the purpose of making recommendations about the economic and efficient use of resources, effective achievement of business objectives, and compliance with company policies. 1. 27a. IncorrectWhile not the primary objective of an operational audit, auditors should still be concerned about compliance with financial accounting standards. b. CorrectThis statement is part of the basic definition of operational auditing. c. IncorrectAn operational audit does not focus on the financial statements. d. IncorrectAnalytical tools and skills are an important part of financial auditing. 1. 28a. CorrectThe proper reference is to the appropriate reporting framework. b. IncorrectThe AICPA does not refer only to the FASB for the appropriate reporting framework. c. IncorrectThe reference to the SEC is wrong. d. IncorrectThis is an abstract of the AAA definition. 1. 29d. CorrectWhile â€Å"complexity,† â€Å"remoteness,† and â€Å"consequences† are good answers, â€Å"skepticism,† or potential conflict of interest, generally drives the demand for audited financial statements. 1. 30d. CorrectSarbanes-Oxley prohibits the provision of all of the services listed in answers a, b, and c, therefore, d (all of the above) is the best response. 1. 31a. IncorrectAuditors do not reduce business risk. b. CorrectAuditors give some assurance that the information risk is low. c. IncorrectComplexity creates demand for accounting services, but is not an audit objective. d. IncorrectAuditors only indirectly control the timeliness of financial statements. 1. 32d. CorrectAnswers a, b, and c refer to a financial statement audit, an internal controls attestation engagement, and an operational audit, respectively. Compliance refers to following laws, rules, regulations, and policies. 1. 33d. CorrectWhile answers a, b, and c are true, experience, education, and successful completion of the Uniform CPA are all necessary to be licensed as a CPA. 1. 34d. CorrectThe mission of the U. S. Government Accountability Office is to ensure that public officials are using public funds efficiently, effectively, and economically. 1. 35b,d CorrectThe two categories of performance audits are economy and efficiency audit and program audits. 1. 36c. CorrectReview of credit ratings of customers gives indirect evidence of the collectibility (valuation) of accounts receivable. 1. 37a. IncorrectRhonda’s representations are not sufficient evidence to support assertions made in the financial statements. b. IncorrectDespite Rhonda’s representations, Jones must gather additional evidence to corroborate Rhonda’s assertions. . IncorrectRhonda’s representations are a form of evidence (albeit weak) that should neither be disregarded, nor blindly regarded without professional skepticism. d. CorrectRhonda’s assertions need corroboration. 1. 38a. IncorrectAlthough there is a high level of risk associated with client acceptance, this phrase was created by the au thors. b. CorrectInformation risk is the probability that the information circulated by a company will be false or misleading. c. IncorrectMoral hazard is the risk that the existence of a contract will change the behavior of one or both parties to the contract. d. IncorrectBusiness risk is the probability an entity will fail to meet its objectives and, ultimately, fail. 1. 39a. CorrectCompleteness includes cutoff which refers to accounting for revenue, expense, and other transactions in the proper period (neither postponing some recordings to the next period nor accelerating next-period transactions into the current-year accounts). 1. 40d. CorrectThe objective related to rights and obligations is to establish with evidence that amounts reported as assets of the company represent its property rights and that the amounts reported as liabilities represent its obligations. . 41b. CorrectManagement’s existence assertion states that reported assets, liabilities, and equities actually exist. 1. 42a. IncorrectUnder Sarbanes-Oxley, professional service firms are prevented from acting in a managerial decision making role for an audit client. b. IncorrectUnder Sarbanes-Oxley, professional service firms are prevented from auditing the firm’s own work on an audit client. c. IncorrectUnder Sarbanes-Oxley, professional service firms may only provide tax consulting service to an audit client with the audit committee’s approval. d. CorrectSarbanes-Oxley prevents professional service firms from engaging in any of the above listed capacities. 1. 43 d. CorrectReciprocity refers to the process through which CPAs licensed in one state can obtain a CPA certificate and license in another state. 1. 44a. CorrectAuditing is a subset of attestation engagements that focuses on the certification of financial statements. b. IncorrectAuditing is a subset of attestation that provides higher assurance than that provided by an attestation engagement. c. IncorrectConsulting engagements focus on providing clients with advice and decision support. d. IncorrectAssurance engagements are designed to improve the quality of information, or its context, for decision makers. 1. 45d. CorrectAlthough auditing is a subset of attestation, and attestation is a subset of assurance, the focus of the engagements tends to be very specific. 1. 46d. CorrectCredibility, advancement, and monetary rewards are all reasons to become certified. SOLUTIONS FOR EXERCISES AND PROBLEMS 47. Audit, Attestation, and Assurance Services Students may encounter some difficulty with this matching because the Special Committee on Assurance Services listed many things that heretofore ave been considered â€Å"attestation services† (long before assurance services were invented). Maybe this is a good vehicle for discussing the considerable overlap between attestation services (attestation standards) and assurance services. †¢ Real estate demand studies — Assurance service (listed by SCAS but not in the textbook chapter) †¢ Ballot for awards show — Assurance service (listed by SCAS but not in the textbook chapter) [But PwC attested to the Academy Awards ballot results long before assurance services were invented] Utility rate applications — Attestation service (or maybe a consulting service; I’m somewhat surprised the SCAS did not list it as an assurance service. ) †¢ Newspaper circulation audits –Assurance service (listed by SCAS but not in the textbook chapter) [But this work has appeared in prior years in examples of attestation services] †¢ Third-party reimbursement maximization — Assurance service (listed by SCAS and listed in the textbook chapter) †¢ Annual financial report to stockholders — Audit service Rental property operations review — Assurance service (listed by SCAS and listed in the textbook chapter) †¢ Examination of financial forecasts and projections — Attestation service (but also listed by SCAS as an assurance service) †¢ Cus tomer satisfaction surveys– Assurance service (listed by SCAS and listed in the textbook chapter) †¢ Compliance with contractual requirements — Attestation service (but also listed by SCAS as an assurance service) †¢ Benchmarking/best practices — Assurance service (listed by SCAS and listed in the textbook chapter) Evaluation of investment management policies — Assurance service (listed by SCAS and listed in the textbook chapter) †¢ Information systems security reviews — Assurance service (listed by SCAS and listed in the textbook chapter) †¢ Productivity statistics — Attestation service (but also listed by SCAS as an assurance service under various descriptions) †¢ Internal audit strategic review — Assurance service (listed by SCAS and listed in the textbook chapter) †¢ Financial statements submitted to a bank loan officer — Audit service 1. 49 ASB Assertions PCAOB Assertion |Corresponding ASB ass ertion |Nature of assertion | |Existence or Occurrence |Existence |Balance | | |Occurrence |Transactions | | | |Disclosures | |Rights and Obligations |Rights and Obligations |Balances | | | |Disclosures | |Completeness |Completeness |Transactions | | | |Balances | | | |Disclosures | | |Cutoff Transactions | |Valuation and Allocation |Accuracy |Transactions | | | |Disclosures | | |Valuation |Balances | | | |Disclosures | |Presentation and Disclosure |Classification |Transactions | | | |Disclosures | | |Understandability |Disclosures | 1. 52Identification of Audits and Auditors The responses to this matching type of question are ambiguous. The engagement examples are real examples of external, internal and governmental audit situations. You might point out to students that the distinctions among compliance, economy and efficiency and program results audits are not always clear. The â€Å"solution† is shown below in matrix form, showing some engagement numbers in two or t hree cells. The required schedule follows. |Type of Audit | | |Financial Statement | |Economy, Efficiency |Program | |Auditor | |Compliance | |Results | |Independent CPA |2, 10 | | | | |Internal Auditor | |6, 8 |4, 8 | | |Governmental (GAO) | | |1, 3 |1, 3, 9 | |IRS Auditor | |5 | | | |Bank Examiner | |7 | | | |Proprietary school’s training expenses |Economy and Efficiency Program Results |Governmental (GAO) | |Advertising agency financial statements |Financial statement |Independent CPAs | |Dept. f Defense launch vehicle |Economy and Efficiency or Program Results |Governmental (GAO) | |Municipal services |Economy and Efficiency |Internal auditors | |Tax shelters |Compliance |IRS auditors | |Test pilot reporting |Compliance |Internal auditors | |Bank solvency |Compliance |Bank examiners | |Materials inspection by manufacturer |Compliance or Economy and Efficiency |Internal auditors | |States’ reporting chemical use data |Program goal |Governmental (GAO) | |Sports compl ex forecast |Financial statement |Independent CPAs | SOLUTIONS FOR REVIEW CHECKPOINTS 2. 1For independent (external) auditors of financial statements, practice standards are issued by the AICPA Auditing Standards Board (in the form of Statements on Auditing Standards) and the Public Company Accounting Oversight Board (in the form of Auditing Standards). Statements on Auditing Standards are appropriate for the audits of nonpublic entities, while Auditing Standards are appropriate for the audits of public entities. For governmental auditors, the Government Accountability Office issues Government Auditing Standards (also known as the â€Å"Yellow Book†). For internal auditors, the Institute of Internal Auditors issues Statements of Internal Auditing Standards (also known as the â€Å"Red Book†). For fraud auditors, the Association of Certified Fraud Examiners issues Professional Standards and Practices for Certified Fraud Examiners. For auditors in other countries, the IFAC International Auditing and Assurance Standards Board issues International Standards on Auditing and Assurance. 2. 2Generally accepted auditing standards are standards that identify necessary qualifications and characteristics of auditors and guide the conduct of the audit examination. Generally accepted accounting principles represent the requirements for the preparation and presentation of financial statements and accompanying footnote disclosures. These two types of standards are related to one another because a primary objective of a GAAS audit is to allow auditors to conclude whether an entity’s financial statements are prepared and presented in conformity with GAAP. 2. 3The three fundamental principles are: 1. Responsibilities, which involves having appropriate competence and capabilities, complying with relevant ethical requirements, maintaining professional skepticism and exercising professional judgment. 2. Performance, which requires auditors to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement by: (1) planning the work and properly supervising assistants; (2) determining and applying appropriate material levels; (3) identifying and assessing the risk of material misstatement; and, (4) obtaining sufficient appropriate audit evidence. 3. Reporting, which requires the auditor to express an opinion as to whether the financial statements are prepared in accordance with the applicable financial reporting framework. Auditing procedures relate to acts to be performed during the engagement. Auditing standards deal with measures of the quality of performance of those acts and the objectives to be attained. Auditing standards are less subject to change and provide the criteria for rejecting, accepting, or modifying auditing procedures in a given circumstance. An example of the relative stability of standards and procedures is found in the change from non-computerized information systems to computerized information systems. New auditing procedures were required to evaluate computerized information systems, but auditing standards remained unchanged and were the criteria for determining the adequacy of the new auditing procedures. 2. 4Independence in fact represents auditors’ mental attitudes (do auditors truly act in an unbiased and impartial fashion with respect to the client and fairness of its financial statements? ). Independence in appearance relates to financial statement users’ perceptions of auditors’ independence. Auditors can be independent in fact but not perceived to be independent. For example, ownership of a small interest in a public client would probably not influence auditors’ behavior with respect to the client. However, it is likely that third-party users would not perceive auditors to be independent. 2. Due care reflects a level of performance that would be exercised by reasonable auditors in similar circumstances. Auditors are expected to have the skills a nd knowledge of others in their profession (known as that of a prudent auditor) and are not expected to be infallible. 2. 6Professional skepticism is a state of mind that is characterized by appropriate questioning and a critical assessment of audit evidence. Professional judgment is the auditors’ application of relevant training, knowledge, and experience in making informed decisions about appropriate courses of action during the audit engagement. Auditors are required to demonstrate professional skepticism and professional judgment throughout the entire audit process. 2. Reasonable assurance recognizes that a GAAS audit may not detect all material misstatements and auditors are not â€Å"insurers† or â€Å"guarantors† regarding the fairness of the company’s financial statements. The following characteristics of an audit do not permit auditors to provide absolute assurance: †¢ Mistakes and misinterpretations may occur †¢ Management judgments an d estimates affect financial reporting †¢ Audit procedures cannot always be relied upon to detect misstatements †¢ Audit engagements must be conducted within a reasonable period of time and so as to achieve a balance between benefit and cost. 2. 8Three elements of planning and supervision considered essential in audit practice are: †¢ A written audit plan. †¢ An understanding of the client’s (auditee’s) business. Policies to allow an audit team member to document disagreements with accounting or auditing conclusions and disassociate him or herself from the matter. 2. 9The timing of the auditors’ appointment is important because auditors need time to properly plan the audit and perform the necessary work without undue pressure from tight deadlines. 2. 10Materiality is the dollar amount that would influence the lending or investing decisions of users; this concept recognizes that auditors should focus on matters that are important to financial statement users. Materiality should be considered in planning the audit, performing the audit, and evaluating the effect of misstatements on the entity’s financial statements. 2. 1Auditors obtain an understanding of a client, including its internal control, as a part of the control risk assessment process primarily in order to plan the nature, timing and extent of substantive audit procedures. A secondary purpose is because of auditors’ responsibilities for reporting on client’s internal controls under Auditing Standard No. 5. 2. 12As the client’s internal control is more effective (a lower level of control risk), auditors may use less effective substantive procedures (a higher level of detection risk). Conversely, when the client’s internal control is less effective (a higher level of control risk), auditors must use more effective substantive procedures (a lower level of detection risk). 2. 13Audit evidence is defined as the information used by a uditors in arriving at the conclusion on which the audit opinion is based. 2. 4External documentary evidence is audit evidence obtained from another party to an arm’s-length transaction or from outside independent agencies. External evidence is received directly by auditors and is not processed through the client’s information processing system. External-internal documentary evidence is documentary material that originates outside the bounds of the client’s information processing system but which has been received and processed by the client. Internal documentary evidence consists of documentary material that is produced, circulates, and is finally stored within the client’s information processing system. Such evidence is either not circulated to outside parties at all or is several steps removed from third-party attention. 2. 5In general, evidence that is completely external in nature is most reliable, because the client has not influenced its processing . In contrast, evidence that is completely internal in nature is least reliable, as it may represent a fictitious transaction created or modified by client personnel to enhance perceptions of the client’s financial statements. 2. 16As auditors need to achieve lower levels of detection risk, more appropriate evidence needs to be obtained. Thus, auditors should gather higher quality evidence (more reliable evidence). For example, auditors may choose to obtain evidence from external sources rather than internal sources. In addition, for lower levels of detection risk, auditors need to gather more sufficient evidence. Because sufficiency relates to the quantity of evidence, a greater number of transactions or components of an account balance should be examined. 2. 17A financial reporting framework is a set of criteria used to determine the measurement, recognition, presentation, and disclosure of material items in the financial statements. The financial reporting framework is related to auditors’ reporting responsibilities because this framework serves as the basis against which the financial statements are evaluated and the auditors’ opinion on the financial statements is expressed. 2. 18Four types of opinions and their conclusions: Type | |Conclusion | |Unqualified opinion | |Financial statements are presented in conformity with GAAP. | |Adverse opinion | |Financial statements are not presented in conformity with GAAP. | |Qualified opinion | |Financial statements are presented in conf ormity with GAAP, except for one or | | | |more departures or issues of concern. | |Disclaimer of opinion | |An opinion cannot be issued on the financial statements. | 2. 19The auditors’ report is dated at the point when all significant procedures have been completed by auditors and auditors have gathered sufficient appropriate evidence. This date is referred to as the audit completion date. 2. 20Public accountants should issue a report when they are associated with financial statements because users may mistakenly assume that an audit has been conducted and that the entity’s financial statements are fairly presented according to GAAP. 2. 21The purpose served by the attestation standards is to guide work in attestation areas and engagements other than audits of financial statements. 2. 22The major differences between attestation standards and generally accepted auditing standards (GAAS) lie in the areas of practitioner competence, materiality and the risk of material misstatement, and reporting. GAAS presume knowledge of accounting and require competence and capabilities as auditors (meaning auditors of financial statements). The attestation standards are more general, requiring training and proficiency in the â€Å"attest function† and knowledge of the â€Å"subject matter of the assertions. † The attestation standards have no specific requirement for determining materiality levels or obtaining and understanding of the entity and its environment to assess the risk of material misstatement. Because attestation engagements may cover information not confined to accounting and financial assertions, these activities may not be appropriate for all attest engagements. Reporting is different because attestations on nonfinancial information do not depend upon generally accepted accounting principles. In addition, GAAS do not address two reporting issues (stating significant reservations about the engagement and indicating that the report is only intended for specified parties) that are important reporting aspects for attestation engagements. 2. 23A system of quality control provides firms with reasonable assurance that the firm and its personnel (1) comply with professional standards and applicable regulatory and legal requirements and (2) issue reports that are appropriate in the circumstances. The six elements of a system of quality control are: . Leadership responsibilities for quality within the firm (â€Å"tone at the top†) 2. Relevant ethical requirements 3. Acceptance and continuance of clients 4. Human resources 5. Engagement performance 6. Monitoring 24. In deciding whether to accept or continue an engagement with a client, firms sho uld consider: †¢ The integrity of the client and the identity and business reputation of its owners, key management, related parties, and those charged with governance. †¢ Whether the firm possesses the competency, capability, and resources to perform the engagement. †¢ Whether the firm can comply with the necessary legal and ethical requirements. If firms decide to withdraw from an engagement, the firm should document significant issues, consultations, conclusions, and the basis for any conclusions related to the decision to withdraw. 25. Typically, firms that audit nonpublic companies have peer reviews conducted through the AICPA’s Center for Public Company Audit Firms Peer Review Program. While firms that are subject to PCAOB review requirements can elect to have peer reviews conducted under this program, most choose not to do so. 2. 26The PCAOB’s monitoring role for firms providing auditing services to public entities includes registering public accounting firms and conducting inspections of registered public accounting firms (similar to peer reviews). 2. 7The frequency of PCAOB inspections depends upon the number of audits conducted by member firms. For firms performing audits for more than 100 public companies, inspections are required on an annual basis. For those performing audits for fewer than 100 publi c companies, inspections are conducted every three years. SOLUTIONS FOR MULTIPLE-CHOICE QUESTIONS 2. 28a. CorrectGathering audit evidence is a component of the performance principle. b. IncorrectWhile reasonable assurance is related to gathering audit evidence, this is not one of the categories of principles c. IncorrectThe reporting principle relates to the contents of the auditors’ report d. IncorrectThe responsibilities principle relates to the personal integrity and professional qualifications of auditors. 2. 29a. IncorrectThis practice relates to accountants’ competence and capabilities, not due care. b. IncorrectThis practice relates to the reporting principle. c. IncorrectSufficiency of evidence relates to the performance principle and not due care. d. CorrectThese practices are a part of due care. 2. 30a. IncorrectGAAS relates to the conduct of audit engagements and not overall professional services. b. CorrectStandards within a system of quality control are firm- (rather than auditor-) related. c. IncorrectGAAP relates to accounting and financial reporting, rather than auditing practices. d. IncorrectInternational auditing standards govern the conduct of audits conducted across international borders. 2. 31a. IncorrectRelying more extensively on external evidence is related to the appropriateness (or quality) of evidence. b. IncorrectFocusing on items with more significant financial effects on the financial statements is related to materiality. c. CorrectProfessional skepticism is characterized by appropriate questioning and a critical assessment of audit evidence. d. IncorrectFinancial interests are most closely related to auditors’ independence. 2. 32a. CorrectAuditors study internal control to determine the nature, timing, and extent of substantive tests. b. IncorrectConsulting suggestions are secondary objectives in an audit. c. IncorrectInformation about the entity’s internal control is, at best, indirect evidence about assertions in the financial statements. d. IncorrectInformation about the entity’s internal control provides auditors with little opportunity to learn about changes in accounting principles. 2. 33a. IncorrectExternal evidence is considered to be relatively reliable. b. CorrectManagement representations should least affect auditors’ conclusions, as they have not been validated or corroborated by external parties. c. IncorrectAuditor-prepared evidence is considered to be the most reliable form of evidence. d. IncorrectAlthough a representation of a client employee, inquiry of the entity’s legal counsel is considered more reliable than that of entity management. 2. 34a. IncorrectInquiry of management should least affect auditors’ conclusions. b. IncorrectAlthough very persuasive, auditors’ personal knowledge (choice d) provides the most persuasive evidence c. IncorrectObservation of a client’s procedures provides evidence on the effectiveness of the client’s internal control, but not the existence assertion for newly-acquired computer equipment. d. CorrectAuditors’ personal knowledge provides the most persuasive evidence. 2. 35a. IncorrectInquires of client personnel are the least reliable form of evidence. b. IncorrectWhile more reliable than inquiries (choice a), inspection of internal documents is relatively low in terms of reliability. c. IncorrectWhile sales invoices are documents created by external parties, the fact that these documents were received from client personnel decreases their reliability. d. CorrectBecause the statements were received directly from outside parties, this is a more reliable form of evidence than choice (c). 2. 36a. IncorrectDocumentation of this nature would not be related to independence. b. IncorrectWhile the quality of the documentation and the conclusions included in the documentation might provide information about competence and capabilities, choice (c) is more appropriate. c. Correct Initials of the preparer and reviewer provide evidence that the documentation was reviewed, which relates to planning and supervision. d. IncorrectWhile the quality of the documentation and the conclusions included in the documentation might provide information about sufficient appropriate evidence, choice (c) is more appropriate 2. 37NOTE TO INSTRUCTOR: Since this question asks students to identify the requirement that is not included in attestation standards, the response labeled â€Å"correct† is not included in attestation standards and those labeled â€Å"incorrect† are included in attestation standards. a. IncorrectAttestation standards require adequate knowledge of the subject matter. b. CorrectAn understanding of the client’s environment (including internal control) is not required under attestation standards, because internal control may not always be relevant to the subject matter of the attestation. c. IncorrectAttestation standards require sufficient evidence to be gathered. d. IncorrectAttestation standards require independence in mental attitude. 2. 38NOTE TO INSTRUCTOR: Since this question asks students to identify the concept that is least related to due care, the response labeled â€Å"correct† is least related to due care and those labeled â€Å"incorrect† are more related to due care. a. IncorrectDue care requires the level of skills and knowledge of others in the auditors’ profession, which would require independence in fact. b. IncorrectSee choice (a) above. c. IncorrectDue care refers to the performance of a â€Å"prudent† auditor. d. CorrectDue care recognizes that mistakes and misinterpretations may occur during the audit. 2. 39a. IncorrectInternal documents are a relatively low quality of evidence. b. IncorrectManagement representations (and the related verbal inquiries) are the lowest quality of evidence. c. IncorrectWhile direct, external evidence is of reasonable quality, it is of lower quality than direct personal knowledge of the auditor (choice d). d. CorrectDirect, personal knowledge of auditors is the most appropriate form of evidence. 2. 40a. IncorrectWhile it may increase auditors’ knowledge about the client, obtaining an understanding of a client’s internal control does not directly influence auditors’ competence and capabilities. b. IncorrectObtaining an understanding of a client’s internal control does not directly influence auditors’ independence. c. IncorrectObtaining an understanding of a client’s internal control does not directly help satisfy the quality control standard about audit staff professional development. d. CorrectThe primary purpose of obtaining an understanding of a client’s internal control is to plan the nature, timing, and extent of substantive audit procedures on an engagement. 2. 41d. CorrectIndependence confirmations would ensure that all firm personnel are independent with respect to that firm’s clients, which is related to the â€Å"Relevant Ethical Requirements† element of a system of quality control. It would not relate to acceptance and continuance of clients (a), engagement performance (b), or monitoring (c). 2. 42b. CorrectGovernment auditing standards are issued by the Government Accountability Office (GAO). Governmental accounting standards are issued by the Governmental Accounting Standards Board. 2. 43a. CorrectConsultation with a specialist demonstrates due care if auditors do not have expertise in the area in question. b. IncorrectAuditors are experts in financial matters, not areas of art (and other collectibles) valuation. c. IncorrectGAAS applies to all audit engagements, including audit engagements for not-for-profit organizations. d. IncorrectSince (a) is correct, (d) cannot be correct. 2. 4NOTE TO INSTRUCTOR: Since this question asks students to identify the topic that is not been addressed in the auditors’ report, the response labeled â€Å"correct† is not addressed in the auditors’ report and those labeled â€Å"incorrect† are addresse d in the auditors’ report. a. IncorrectThe responsibilities of the auditor and management are provided in the introductory paragraph. b. CorrectAuditors provide reasonable (but not absolute) assurance in an audit engagement (this is noted in the scope paragraph of the auditors’ report). c. IncorrectA description of the audit engagement is provided in the scope paragraph of the auditors’ report. d. IncorrectThe auditors’ opinion on internal control over financial reporting is provided in the internal control paragraph of the auditors’ report. 2. 45a. CorrectAttestation standards differ from generally accepted auditing standards in that they apply to engagements other than those on historical audited financial statements. b. IncorrectAttestation standards require that the practitioner be independent. c. IncorrectAttestation standards may apply to prospective â€Å"what if† financial statements. d. IncorrectAttestation standards include requirements related to evidence. SOLUTIONS FOR EXERCISES AND PROBLEMS 2. 47Performance Principle The important elements of the performance principle and their relation to the C. Reis Company audit are: 1. Auditors must plan the work and appropriately supervise any assistants. Fulfilling this element would include the preparation of an audit plan for accounts receivable and reviewing it with the assistant prior to beginning the examination. These tasks were not done. Also, the completed audit documentation should have been reviewed to determine whether an adequate examination was performed. The illustration states that this procedure was followed. 2. Auditors must determine and apply appropriate materiality levels throughout the audit. This scenario did not address the process through which materiality levels were determined, so potential strengths and weaknesses related to materiality cannot be assessed. 3. Auditors must identify and assess risks of material misstatement. This element requires auditors to obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures. The case presented did not reference any work on the internal control. Complete reliance upon prior-year audit documentation in lieu of an evaluation of the existing internal control is improper, because changes may have been implemented to the system and controls by the client. 4. Auditors must obtain sufficient appropriate audit evidence. The assistant’s preparation of audit documentation, confirmation requests, and other procedures seem to fulfill the requirements of this standard if the audit work is properly performed and is of sufficient scope. 2. 48Time of Appointment and Planning From a theoretical viewpoint (and, in fact, from a practical viewpoint as well) such short notice of a request for an audit causes difficulties with planning the audit work, establishing staffing requirements, and reviewing the work; all of these features are important elements in the exercise of due care. The December 26 – January 20 period is a serious time constraint for an initial audit engagement. The greatest difficulties involve due care as well as the ability to appropriately perform the engagement (planning and supervision, determining materiality levels, identifying and assessing risks of material misstatement, and obtaining sufficient appropriate evidence). In view of the short notice and the time constraint, there may be some question as to whether an audit could be adequately completed by January 20. 2. 55Principles Case Study | | | | |Responsibilities | | | | | | | |1. Auditors are responsible for appropriate competence and | |1. It was inappropriate for Holmes to hire the two students to | |capabilities to perform the audit. | |conduct the audit. The examination must be conducted by persons | | | |with proper education and experience in the field of auditing. | | | |Inexperienced persons can assist, if they are supervised. | |2. Auditors are responsible for complying with relevant ethical | |2. To satisfy the independence requirement, Holmes must be | |requirements. |without bias with respect to the client under audit. Because of | | | |the financial interest in the bank loan, Holmes is neither | | | |independent in fact nor appearance with respect to the assignment | | | |undertaken. In addition, because of a number of actions (hiring | | | |unqualified individuals, failure to supervise those individuals, | | | |etc. ), Holmes did not appear to exhibit due care. | | | | | | | | | | |3. The fact that Holmes merely accepted the financial statements | | | |without questioning any evidence demonstrates lack of professional| |3. Auditors are responsible for maintaining professional | |skepticism (as well as a lack of good professional judgment). | |skepticism and exercising professional judgment throughout the | | | |planning and performance of the audit. | | | | | | |Performance | | | | | | | |1. The auditor must adequately plan the work and must properly | |1. This element recognizes that early appointment of auditors has | |supervise any assistants. |advantages for auditors and the client. Holmes accepted the | | | |engagement without considering the availability of staff. In | | | |addition, Holmes failed to supervise the assistants. The work | | | |performed was not adequately planned. | | | | | |2. The auditor must determine and apply appropriate materiality | |2. There was no discussion that appropriate materiality levels | |level or levels. | |were determined or applied for the audit by either Holmes or the | | | |two accounting students. Thus, compliance with this element is | | | |difficult to assess. | |3. The auditor must assess the risk of material misstatement based| |3. Holmes did not study the client’s internal control nor did the | |on the entity and its environment. | |assistants. There appears to have been no audit examination at | | | |all. The work performed was more an accounting service than it was| | | |an auditing service. | | | | | |4. The auditor must obtain sufficient appropriate audit evidence | |4. No evidence was obtained to support the financial statements. | |about whether material misstatements exist. | |The auditors merely checked the mathematical accuracy of the | | | |records and summarized the accounts. Standard audit procedures and| | | |techniques were not performed. | | | | |Reporting | | | | | | | |1. Based on evaluation of the evidence obtained, the auditor | |1. Because a proper examination was not conducted, the report | |expresses an opinion in accordance with the auditor’s findings, or | |should indicate that no opinion can be expressed as to the fair | |states that an opinion cannot be expressed, in the form of a written | |presentation of the financial statements in accordance with | |report. The opinion states whether the financial statements are | |generally accepted account ing principles. |prepared, in all material respects, in accordance with the | | | |appropriate financial reporting framework. | | | | | | | 2. 57System of Quality Control a. Leadership responsibilities for quality within the firm b. Engagement performance c. Human resources d. Monitoring e. Human resources f. Relevant ethical requirements g. Acceptance and continuance of clients h. Leadership responsibilities for quality within the firm i. Engagement performance SOLUTIONS FOR REVIEW CHECKPOINTS 12. Management prepares a report on the effectiveness of internal control over financial reporting. The auditors prepare reports on (1) the entity’s financial statement and other disclosures and (2) the effectiveness of the entity’s internal control over financial reporting. These can be presented as two separate reports or a combined report. 2. Management’s report on internal control over financial reporting consists of the following major components: †¢ A statem ent indicating that management is responsible for establishing and maintaining adequate internal control over financial reporting. †¢ A statement identifying the framework used by management to assess the effectiveness of the entity’s internal control. Management’s opinion on the effectiveness of the entity’s internal control, including an explicit statement as to whether the internal control over financial reporting is effective. †¢ A statement that the registered accounting firm auditing the financial statements (auditor) has issued an attestation report on the entity’s internal control over financial reporting. 12. 3The auditors’ report serves to communicate to users three specific statements with respect to the financial statements, the conduct of the audit, and the entity in general. First, the report indicates whether the financial statements are presented in conformity with GAAP. Second, auditors use their report to indicate any un usual aspects of the audit examination. Third, even if the financial statements are fairly presented and no problems were noted in the conduct of the audit, the auditors can use the report to communicate information useful to decision makers that may not appear on the face of the financial statements. 12. 4Nine important elements of the auditors’ standard report are: 1. Title. The title should contain the word independent, as in â€Å"Independent Registered Public Accounting Firm† or â€Å"Independent Auditors†. 2. Address. The report shall be addressed to the client, which occasionally may be different from the auditee. 3. Notice of Audit. A sentence should identify the financial statements and indicate that they were audited. This appears in the introductory paragraph. 4. Responsibilities. The report should state management’s responsibility for the financial statements and the auditors’ responsibility for the report. These statements are also in the introductory paragraph. 5. Description of the Audit. The second paragraph (scope paragraph) should declare that the audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and describe the principal characteristics of an audit, including a statement of belief that the audit provided a reasonable basis for the opinion. 6. Opinion. The report shall express an opinion (opinion paragraph) regarding conformity of the financial statements with accounting principles generally accepted in the United States of America. 7. Internal Control. The report should reference the auditors’ examination, report, and opinion on the client’s internal control over financial reporting. 8. Signature. The auditors (partner of the audit team) shall sign the report, manually or otherwise. 9. Date. The report shall be dated using the date