Which of the following statements is not true? a. Tests of transactions are often performed several months prior to the balance sheet date b. It is common to use analytical procedures at any time during the audit c. When controls are not considered effective, or when control deviations are discovered, substantive tests will be eliminated d. Tests of details of

Which of the following statements is not true? a. Tests of transactions are often performed several months prior to the balance sheet date b. It is common to use analytical procedures at any time during the audit c. When controls are not considered effective, or when control deviations are discovered, substantive tests will be eliminated d. Tests of details of

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 27CYBK

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Which of the following statements is incorrect? A. As the risk of material misstatement in the financial statements increases, the auditor relies more on substantive analytical procedures rather than tests of details of transactions and balances B. It is common, but not required, to use analytical procedures as substantive tests; C. Tests of transactions are often performed during the interim audit work D.Tests of details of balances are normally done during the year-end audit work
Which of the following statements is incorrect? Group of answer choices It is common, but not required, to use analytical procedures as substantive tests Tests of transactions are often performed during the interim audit work As the risk of material misstatement in the financial statements increases, the auditor relies more on substantive analytical procedures rather than tests of details of transactions and balances Tests of details of balances are normally done during the year-end audit work
The internal auditors of Tantacle Electrical Company report to the controller. Because ofchanges made in the past year to several of the transaction processing programs, the internalauditors created a new test data set. The external auditors requested that the old date set alsobe run. The internal auditors, embarrassed, explained that they overwrote the original testdata set.Required:Outline any potential risks and determine the courses of action the external auditor shouldtake.
Which of the following substantive procedures should auditors ordinarily perform regarding subsequent events?a. Compare the latest available interim financial statements with the financial statementsbeing audited.b. Send second requests to the client’s customers who failed to respond to initial accountsreceivable confirmation requests.c. Communicate material weaknesses in internal control to the client’s audit committee.d. Review the cutoff bank statements for several months after the date of the financialstatements.
The practice of auditing firms to spread work throughout the year by carrying out as many auditing procedures as practicable before the balance sheet date, in order to minimize the load during the peak period. This is called a. Test of recorded transactions b. Confirmation of receivable and payablesc. Observation and test-check of inventoriesd. Interim work
The auditors for Golden Gate Company have a gut feeling that liabilities may be unrecorded. Their initial suspicions stem from a radical decline in accrued liabilities from last year. Golden Gate’s records are all computerized. Required Devise a plan to search the data files to perform a substantive test for identifying unrecorded liabilities.
The following are typical questions that might appear on an internal control questionnaire for accounts payable. 1. Are monthly statements from vendors reconciled with the accounts payable listing? 2. Are vendors’ invoices matched with receiving reports before they are approved for payment? 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 the risk of material misstatement.
During a consulting engagement involving the development of a new accounts payable system, an internal auditor identified a control weakness. Although the weakness was reported to the manager of the systems development project, the manager decided to accept the risk because, in the manager's opinion, the risk was not significant. Six months after the implementation of the new system, the disbursements process was audited by another internal auditor who determined that the control weakness had impacted payment processing. The auditor reviewing the disbursements process should do which of the following? a. Request that the manager of the systems development project fix the system b. Report the control weakness to management and the audit committee c. Discuss the control weakness with the manager of the accounting system, but do not report the finding d. Disregard the control weakness because management previously decided to accept the risk e. None of the choices
The internal auditors of Tantacle Electrical Company report to the controller. Because of changes made in the past year to several of the transaction processing programs, the internal auditors created a new test data set. The external auditors requested that the old date set also be run. The internal auditors, embarrassed, explained that they overwrote the original test data set.Outline any potential risks and determine the courses of action the external auditor should take.
The internal auditors of Brown Electrical Company report to the controller. Because of changes made in the past year to several of the transaction processing programs, the internal auditors created a new test data set. The external auditors requested that the old data set also be run. The internal auditors, embarrassed, explained that they overwrote the original test data set. Required: Outline any potential risks, and determine the courses of action the external auditor should take.
An auditor discovered the following errors and irregularities while performing tests of controls: Raw materials issued on October 5 were never recorded as issued from the storeroom. Required: What control would have prevented or detected each of the aforementioned errors/irregularities? What tests should the auditor perform to test each control? To which financial statement assertion does the error or irregularity relate?
When accounts receivable are confirmed at an interim date, auditors need not be concerned witha. Obtaining a summary of receivables transactions from the interim date to the year-end date.b. Obtaining a year-end trial balance of receivables, comparing it to the interim trial balance, and obtaining evidence and explanations for large variations. c. Sending negative confirmations to all customers as of the year-end date.d. Considering the necessity for some additional confirmations as of the balance sheet date if balances have increased materially