Chapter 1
The Demand for Audit and Other Assurance Services
Review Questions
1-1
The
relationship
among
audit
services,
attestation
services,
and
assurance services is reflected in Figure 1-3 on page 13 of the text. An
assurance service is an independent professional service to improve the
quality of information for decision makers. An attestation service is a
form
of
assurance
service
in
which
the
CPA
firm
issues
a report
about
the
reliability
of
an
assertion
that
is
the
responsibility
of
another
party.
Audit
services
are
a
form
of
attestation
service
in
which
the
auditor
expresses
a
written
conclusion
about
the
degree
of
correspondence between information and established criteria.
The
most
common
form
of
audit
service
is
an
audit
of
historical
financial statements, in which the auditor expresses a conclusion as to
whether
the
financial
statements
are
presented
in
conformity
with
generally
accepted accounting
principles.
An
example
of
an
attestation
service
is
a
report
on
the
effe
ctiveness
of
an
entity鈥檚
internal
control
over
financial
reporting.
There
are
many
possible
forms
of
assurance
services,
including
services
related
to
business
performance
measurement, health care performance, and information system reliability.
1-2
An
independent
audit
is
a
means
of
satisfying
the
need
for
reliable
information
on
the
part
of
decision
makers.
Factors
of
a
complex society which contribute to this need are:
1.
Remoteness of information
a.
Owners (stockholders) divorced from management
b.
Directors
not
involved
in
day-to-day
operations
or
decisions
c.
Dispersion
of
the
business
among
numerous
geographic
locations and complex corporate structures
2.
Biases and motives of provider
a.
Information
will
be
biased
in
favor
of
the
provider
when
his
or
her
goals
are
inconsistent
with
the
decision maker's goals.
3.
Voluminous data
a.
Possibly millions of transactions processed daily via
sophisticated computerized systems
b.
Multiple product lines
c.
Multiple transaction locations
4.
Complex exchange transactions