Assume that the auditors find serious weaknesses in the internal control of Oak Canyon, Inc., a producer and distributor of fine wines. Would these internal control weaknesses cause the auditors to rely more or less upon analytical procedures during their audit of Oak Canyon? Why?
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Assume that the auditors find serious weaknesses in the internal control of Oak Canyon, Inc., a producer and distributor of fine wines. Would these internal control weaknesses cause the auditors to rely more or less upon analytical procedures during their audit of Oak Canyon? Why?
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- Assume that the auditors find serious weaknesses in the internal control of Oak Canyon, Inc., a producer and distributor of fine wines. Would these internal control weaknesses cause the auditors to rely more or less upon physical evidence during their audit of Oak Canyon? Why?Assume that the auditors find serious weaknesses in the internal control of Oak Canyon, Inc., a producer and distributor of fine wines. Would these internal control weaknesses cause the auditors to rely more or less upon evidence provided by specialists during their audit of Oak Canyon? Why?Assume that the auditors find serious weaknesses in the internal control of Oak Canyon, Inc., a producer and distributor of fine wines. Would these internal control weaknesses cause the auditors to rely more or less upon accounting records during their audit of Oak Canyon? Why?
- Assume that the auditors find serious weaknesses in the internal control of Oak Canyon, Inc., a producer and distributor of fine wines. Would these internal control weaknesses cause the auditors to rely more or less upon documents created and used only within the organization? Why?An auditor is examining a nonpublic company’s inventory procurement system and has decided to perform tests of controls. Under which of the following conditions do GAAS require tests of controls be performed by an auditor?a. Significant weaknesses were found in the company’s internal control.b. The auditor hopes to reduce the amount of work to be done in assessing inherent risk.c. The auditor believes that testing the controls could lead to a reduction in overall audit time and cost.d. Tests of controls are always performed when the auditor begins to assess control risk.Jamie is an auditor. While preparing to audit his client, FoodCourt, he finds a weakness in the company's internal control that might suggest that the company has a higher than normal risk, and revenue may have been recorded in the wrong period. Given this weakness, what information should be communicated to management?
- Respond to each of the following comments that you heard related to the audit of Swan Company, a public entity.a. “We don’t need to consider the risk of material misstatement in our work because we really can’t do anything to reduce that risk.”b. “Because the client has not implemented effective internal controls, we need to gather more reliable evidence. This means we need to test a greater number of transactions and obtain more reliable forms of evidence.”c. “We will really need to spend a lot of time and effort on this audit. Because this client has just filed for a bond offering, we can’t allow for any misstatements in the financial statements. We need to guarantee the accuracy of the client’s financial statements.”d. “Because this company has $140 million in revenues, we really shouldn’t be concerned about smaller accounts because they are not likely to have a major impact on the financial statements.”e. “I know it will be more time consuming and expensive, but we are required to…The auditor is evaluating the internal control of a new client. Management has prepared its assessment of internal control and has concluded that it has some deficiencies but no significant deficiencies and no material weaknesses. However, in reviewing the work performed by management, including the internal auditor, the auditor observes the following: -Sample sizes taken by the internal auditor were never more than ten transactions, and most of the tests of operating effectiveness were based on a sample of one performed as part of a walkthrough of a transaction.-Management has fired the former CFO and a new CFO has not been appointed, but management indicates it has depth in the accounting area and is searching for a new CFO.-The company has no formal whistleblowing function because management has an “open-door” policy so that anyone with a problem can take it up the line.-Management’s approach to monitoring internal control is to compare budget with actual expenses and investigate…Jamie is an auditor. While preparing to audit his client, Food Court, he finds a weakness in the company's internal control that might suggest that the company has a higher than normal risk, and revenue may have been recorded in the wrong period. Given this weakness, what information should be communicated to management?
- An assistant on the Carter Company audit has been working in the revenue cycle and has compiled a list of possible errors and fraud that may result in the misstatement of Carter Company’s financial statements and a corresponding list of controls that, if properly designed and implemented, could assist in preventing or detecting the errors and fraud. For each possible error and fraud numbered a through o, select one internal control from the following answer list that, if properly designed and implemented, most likely could assist management in preventing or detecting the errors and fraud. Each response in the list of controls may be selected once, more than once, or not at all. A. Shipping clerks compare goods received from the warehouse with the details on the shipping documents. B. Approved sales orders are required for goods to be released from the warehouse. C. Monthly statements are mailed to all customers with outstanding balances. D. Shipping clerks compare…The auditor has always received cooperation from a particularclient and has no reason to question management’s integrity. Thecontroller has requested that the auditor inform her about whichwarehouse locations that the auditor will visit during the upcominginventory count. In addition, the controller has requested copies of theauditor’s observations on the physical inventory because she wants tomake sure that a good inventory was taken. Should the auditor complywith these requests? State your rationale, including a discussion of professional skepticism.Field, CPA, is auditing the financial statements of MillerMailorder, Inc. (MMI). Field has compiled a list of possible inherentand fraud risks in the revenue cycle that may result in the misstatementof MMI’s financial statements and a corresponding list ofinternal controls, which, if properly designed and implemented,could assist MMI in preventing or detecting material misstatements.For each risk numbered 1 through 15 in column 1, select one internalcontrol from column 2 (labeled a. through t.), which, if properlydesigned and implemented, most likely could assist MMI in preventingor detecting material misstatements. Internal controls can beselected for more than one risk.