Acct. 444 Week 1 Homework

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Chapter 1 Answers Dia Coleman 1. 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 effectiveness of an entity 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. 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: • 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 • 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. • Voluminous data a. Possibly millions of transactions processed daily via sophisticated computerized systems b. Multiple product lines c. Multiple transaction locations • Complex exchange

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