acquisition and disposals were approved by people coming from the accounting department. Which control is most likely violated? choices: Controls over incompatible duties Controls over reporting of investments Controls over the custody of investments None of the c

acquisition and disposals were approved by people coming from the accounting department. Which control is most likely violated? choices: Controls over incompatible duties Controls over reporting of investments Controls over the custody of investments None of the c

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

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

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

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 26CYBK

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Question

During your testing of controls over investments. You have noted that the acquisition
and disposals were approved by people coming from the accounting department.
Which control is most likely violated?

choices:

Controls over incompatible duties
Controls over reporting of investments
Controls over the custody of investments
None of the choices.

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During your testing of controls over investments. You have noted that the acquisition and disposals were approved by people coming from the accounting department. Which control is most likely violated? Group of answer choices Controls over incompatible duties Controls over reporting of investments Controls over the custody of investments None of the choices.
Following are typical questions that might appear on an internal control questionnaire for investments in marketable securities. Is custody of investment securities maintained by an employee who does not maintain the detailed records of the securities? Are securities registered in the company name? Are investment activities reviewed by an investment committee of the board of directors? Assuming that the operating effectiveness of each of the above procedures is found to be inadequate, describe how the auditors might alter their substantive procedures to compensate for the increased level of control risk.
Assume that the client’s internal controls over the recordingand classifying of fixed asset additions are considered deficient because the individualresponsible for recording new acquisitions has inadequate technical training and limitedexperience in accounting. How will this situation affect the evidence you should accumulate in auditing fixed assets as compared with another audit in which the controls areexcellent? Be as specific as possible.
Nakamura, CPA, has acceptedan engagment to audit financial statements of Grant Manufacturing Company, a new client. Grant has an adequate control environment and a reasonable segregation of duties. Nakamura is about to set the control risk for the assertions related to Grant’s property and equipment.Required:Describe the key internal controls related to Grant’s property, equipment, and related transactions (additions, transfers, major maintenance and repairs, retirements, and dispositions) that Nakamura may consider in set-ting the control risk.
Assume that the client’s internal controls over the recording and classifying of fixed asset additions are considered weak because the individual responsible for recording new acquisitions has inadequate technical training and limited experience in accounting. How will this situation affect the evidence you should accumulate in auditing fixed assets as compared with another audit in which the controls are excellent? Be as specific as possible.
Which of the following audit procedures would not likely be performed for audits of investments?a. Read board of directors’ minutes for authorization of investment strategies.b. Confirm investments with registrar.c. Confirm investments with broker or trustee.d. Compare valuation to published market prices.
Which of the following approaches is most suitable for auditing the finance and investment cycle?a. Perform extensive tests of controls and limit substantive procedures to analytical procedures.b. Ignore internal controls and perform extensive substantive procedures.c. Gain an understanding of internal controls and perform extensive substantive procedures.d. Ignore internal controls and limit substantive procedures to analytical procedures.