ACC491 Differences Between Auditing and Accounting Discussion Respond to the following in a minimum of 175 words Write a brief response, 30 to 90 words fo

ACC491 Differences Between Auditing and Accounting Discussion Respond to the following in a minimum of 175 words

Write a brief response, 30 to 90 words for each question.

Text Problem 1-20
Text Problem 1-21
Text Problem 2-18
Text Problem 2-21 Respond to the following in a minimum of 175 words:
Discuss the differences between auditing and accounting. What overlap in skills exists, if
any, between auditors and accountants? How do the responsibilities of auditors and
accountants differ? How are they similar?
Wk 1 – Week 1 Textbook Problems
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Write a brief response, 30 to 90 words for each question.
Text Problem 1-20
Text Problem 1-21
Text Problem 2-18
Text Problem 2-21
1-20 (Objective 1-7) Five college seniors with majors in accounting are discussing alternative
career plans. The first senior plans to become an internal revenue agent because his primary
interest is income taxes. He believes the background in tax auditing will provide him with better
exposure to income taxes than will any other available career choice. The second senior has decided
to go to work for a CPA firm for at least 5 years, possibly as a permanent career. She believes the
variety of experience in auditing and related fields offers a better alternative than any other
available choice. The third senior has decided on a career in internal auditing with a large industrial
company because of the many different aspects of the organization with which internal auditors
become involved. The fourth senior plans to become an auditor for the GAO because she believes
that this career will provide excellent experience in computer risk assessment techniques. The fifth
senior would like to ultimately become a certified fraud examiner but is not sure where the best
place is to begin his career so that he can achieve this long-term goal.
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a. What are the major advantages and disadvantages of each of the four types of auditing
careers?
b. What do you think is the best early career choice for the senior interested in ultimately
becoming a certified fraud examiner?
c. What other types of auditing careers are available to those who are qualified?
1-21 (Objectives 1-6, 1-7) In the normal course of performing their responsibilities, auditors often
conduct audits or reviews of the following:
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1. Federal income tax returns of an officer of the corporation to determine whether he or she has
included all taxable income in his or her return.
2. Financial statements for use by stockholders when there is an internal audit staff.
3. A bond indenture agreement to make sure a company is following all requirements of the
contract.
• 4. Internal controls at a casino to ensure the casino is in compliance with federal and state
regulations.
• 5. Computer operations of a corporation to evaluate whether the computer center is being
operated as efficiently as possible.
• 6. Annual statements for the use of management.
• 7. Operations of the IRS to determine whether the internal revenue agents are using their time
efficiently in conducting audits.
• 8. Statements for bankers and other creditors when the client is too small to have an audit staff.
• 9. Financial statements of a branch of the federal government to make sure that the statements
present fairly the actual disbursements made during a period of time.
• 10. Federal income tax returns of a corporation to determine whether the tax laws have been
followed.
• 11. The computer operations of a large corporation to evaluate whether the internal controls are
likely to prevent misstatements in accounting and operating data.
• 12. Disbursements of a branch of the federal government for a special research project to
determine whether the expenditures were consistent with the legislative bill that authorized the
project.
Required
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a. For these 12 examples, state the most likely type of auditor (CPA, GAO, IRS, or internal) to
perform each.
b. In each example, state the type of audit (financial statement audit, operational audit, or
compliance audit).
2-18 (Objective 2-6) Sarah O’Hann enjoyed taking her first auditing course as part of her
undergraduate accounting program. While at home during her semester break, she and her father
discussed the class and it was clear that he didn’t really understand the nature of the audit process
as he asked the following questions:
a.
What is the main objective of the audit of an entity’s financial statements?
b.
The audit represents the CPA firm’s guarantee about the accuracy of the financial statements, right?
c.
Isn’t the auditor’s primary responsibility to detect all kinds of fraud at the client?
d.
Given the CPA firm is auditing financial statements, why would they need to understand anything
about the client’s business?
e.
What does the auditor do in an audit other than verify the mathematical accuracy of the numbers in
the financial statements?
Required
If you were Sarah, how would you respond to each question?
2-21 (Objective 2-6) Ray, the owner of a small company, asked Holmes, a CPA, to conduct an audit
of the company’s records. Ray told Holmes that an audit was to be completed in time to submit
audited financial statements to a bank as part of a loan application. Holmes immediately accepted
the engagement and agreed to provide an auditor’s report within 3 weeks. Ray agreed to pay
Holmes a fixed fee plus a bonus if the loan was granted.
Holmes hired two accounting students to conduct the audit and spent several hours telling them
exactly what to do. Holmes told the students not to spend time reviewing internal controls but
instead to concentrate on proving the mathematical accuracy of the ledger accounts and
summarizing the data in the accounting records that support Ray’s financial statements. The
students followed Holmes’s instructions and after 2 weeks gave Holmes the financial statements,
which did not include footnotes. Holmes reviewed the statements and prepared an unqualified
auditor’s report. The report did not refer to generally accepted accounting principles or to the
consistent application of such principles.
Required
Briefly describe each of the principles underlying AICPA auditing standards and indicate how the
action(s) of Holmes resulted in a failure to comply with each principle. Organize your answer as
follows:*
Brief Description of
Principle
Holmes’ Actions Resulting in Failure to Comply with the
Principle

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