1. What is the role of a Transaction Coordinator in an Escrow? What is an advantage of being a licensed TC versus being unlicensed? 2. Why is it important to have a detailed checklist of all required documentation for an Escrow Transaction file? What is the minimum number of years after closing a Broker's transaction file must be available for a Cal DRE audit? 3. An Escrow officer is said to what type of duty to their Principles? Why is having this type of duty important? 4. Describe the 6 elements that are critical for a valid Contract? 5. Would you as an Agent value using a Transaction Coordinator for your Escrows (they usually get paid by the Agent $300-$500 a transaction file) or would you prefer to manage the file transactions files yourself?

1. What is the role of a Transaction Coordinator in an Escrow? What is an advantage of being a licensed TC versus being unlicensed? 2. Why is it important to have a detailed checklist of all required documentation for an Escrow Transaction file? What is the minimum number of years after closing a Broker's transaction file must be available for a Cal DRE audit? 3. An Escrow officer is said to what type of duty to their Principles? Why is having this type of duty important? 4. Describe the 6 elements that are critical for a valid Contract? 5. Would you as an Agent value using a Transaction Coordinator for your Escrows (they usually get paid by the Agent $300-$500 a transaction file) or would you prefer to manage the file transactions files yourself?

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 20MCQ

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ased on an assessment of audit risk, the auditors are concerned with the following two risks: The risk that that the client might be making duplicate payments to vendors. The risk that the client’s accounting clerk might be making unauthorized payments to himself. Required: a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments. b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments. b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.
Responsibilities to Clients’ Cases. Read the following cases. For each case, state whetherthe action or situation shows a violation or potential for violation of the AICPA Code ofProfessional Conduct, explain why, and cite the relevant rule.a. CPA Sal Colt has discovered a way to eliminate most of the boring work of processingroutine accounts receivable confirmations by contracting with the Cohen Mail Service.After the auditor has prepared the confirmations, Cohen stuffs them in envelopes, mailsthem, receives the return replies, opens the replies, and returns them to Colt.b. Cadentoe Corporation, without consulting Jora Cramer, its CPA, has changed itsaccounting so that it is not in conformity with GAAP. During the regular audit engagement, Cramer discovers that the statements based on the accounts are so grossly misleading that they might be considered fraudulent. Cramer resigns the engagement aftera heated argument. Cramer knows that the statements will be given to Sandy Panzer,…
As the audit associate, you were asked by the senior associate to check the completeness of confirmation letters. Upon your review, there is a supplier that has not yet given their reply. What alternative audit procedure would most likely be performed by the audit associate, assuming the audit is at its wrap-up stage? Group of answer choices A. Vouch subsequent payments B. Review the invoice register until audit report date C. Send another confirmation letter D. Perform analytical procedures
The IT auditor can MOST (select one) effectively help a company deal with increasing IT-related risk by: a) Alerting management and the Audit Committee of the risks related to IT, and making audit recommendations that are focused on the root cause. b) Performing a weekly review of system-based audit logs to determine if the company has been breached. c) Ensuring that the company has a log-in banner that warns unauthorized users that they may be subject to criminal prosecution and penalties. d) Conducting an audit of the company's network security and pointing out weak firewall configuration settings in the audit report.
An electronic seal indicating that an electronic seller observes certain practices is Select one: a. Audit b. Attestation services c. Non assurance services d. Other assurance services
Based on an assessment of audit risk, the auditors are concerned with the following two risks: The risk that that the client might be making duplicate payments to vendors. The risk that the client’s accounting clerk might be making unauthorized payments to himself. Required: a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments. b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments. c. Describe the advantages of using data analytics software to identify unusual transactions or entries.
To gather audit evidence related to accounts receivable, the client should mail the confirmation requests. TRUE OR FALSE? WHY?
Responsibilities to Clients’ Cases. Read the following cases. For each case, state whether the action or situation shows a violation or potential for violation of the AICPA Code of Professional Conduct, explain why, and cite the relevant rule.a. CPA Sal Colt has discovered a way to eliminate most of the boring work of processing routine accounts receivable confirmations by contracting with the Cohen Mail Service.After the auditor has prepared the confirmations, Cohen stuffs them in envelopes, mails them, receives the return replies, opens the replies, and returns them to Colt.b. Cadentoe Corporation, without consulting Jora Cramer, its CPA, has changed its accounting so that it is not in conformity with GAAP. During the regular audit engagement, Cramer discovers that the statements based on the accounts are so grossly misleading that they might be considered fraudulent. Cramer resigns the engagement after a heated argument. Cramer knows that the statements will be given to Sandy…
As the manager of the external audit team, you realize that the embedded audit module only writes material invoices to the audit file for the accounts receivable confirmation process. You are immediately concerned that the accounts receivable account may be substantially overstated this year and for the prior years in which this EAM was used.RequiredExplain why you are concerned because all ‘‘material’’ invoices are candidates for confirmation by the customer. Outline a plan for determining if the accounts receivable are overstated.
Confirmation of Trade Accounts Receivable. L. King, CPA, is auditing the financial statements of Cycle Company, a client that has receivables from customers arising from the sale of goods in the normal course of business. King is aware that the confirmation of accounts receivable is a generally accepted auditing procedure.Required:a. Under what circumstances could King justify omitting the confirmation of Cycle’s accounts receivable?b. In designing confirmation requests, what factors are likely to affect King’s assessment of the reliability of confirmations that King sends?c. What alternative procedures could King consider performing when replies to positive confirmation requests are not received?
Which of the following is most closely related to the relevance of audit evidence?a. Auditors decide to physically inspect investment securities held by a custodian instead of obtaining confirmations from the custodian.b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of accounts receivable to evaluate the collectability of accounts receivable.c. In response to less effective internal control, auditors increase the number of customer accounts receivable confirmations mailed compared to that in the prior year.d. Because of a large number of transactions occurring near year-end, auditors decide to confirm a larger number of receivables following year-end instead of during the interim period.
An IT auditor is conducting data analysis procedures on an employee expense report file and notices several expenses for $24.99 from the same individual. The company’s policy requires that any expenses that are under $25.00 do not require a receipt. The IT auditor should: [SELECT ALL THAT APPLY a) Maintain professional skepticism and investigate these transactions further b) Pass on investigating these items further, focusing on higher dollar amounts c) Evaluate the business process approval controls, and related procedures d) Discuss fraud awareness and detection programs with management to gain an understanding of management’s commitment to fraud prevention and related entity-level anti-fraud controls.