Why is studying auditing different from studying other accounting topics?

Why is studying auditing different from studying other accounting topics? How might understanding auditing concepts prove useful for consultants, business man- agers, and other business decision makers?

LO 1-2 1-2 Discuss why there is a demand for auditing services in a free-market economy. What evidence suggests that auditing would be demanded even if it were not required by government regulation?

LO 1-2 1-3 What is meant by the statement “The agency relationship between absentee owners and managers produces a natural conflict of interest”?

LO 1-2 1-4 Why is independence such an important requirement for auditors? How does inde- pendence relate to the agency relationship between owners and managers?

LO 1-3, 1-4 1-5 Define auditing, attest, and assurance services. LO 1-4 1-6 The Committee on Basic Auditing Concepts has provided a widely cited definition

of auditing. What does the phrase “systematic process” mean in this definition? LO 1-5 1-7 Define audit risk and materiality. How are these concepts reflected in the auditor’s

report? LO 1-6 1-8 Briefly describe why on most audit engagements an auditor tests only a sample of

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