EBK AUDITING AND ASSURANCE SERVICES
16th Edition
ISBN: 9780134067117
Author: Hogan
Publisher: VST
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Chapter 10, Problem 20.3MCQ
To determine
Identify the item that may not reveal the management override of internal control.
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Students have asked these similar questions
Which of the following circumstances would most likely cause an auditor to suspectthat material misstatements exist in the financial statements?(1) The assumptions used in developing the prior year’s accounting estimates havechanged.(2) Differences between reconciliations of control accounts and subsidiary recordsare not investigated.(3) More confirmation requests were sent this year relative to last year.(4) Management consults with another CPA firm about complex accounting matters.
1. The use of computer systems in financial reporting increases the risk of material misstatements. true or false
2. Automated controls in a computerized system are always more reliable than manual controls. true or false
3. Which of the following is NOT a requirement for an auditor to maintain independence?
a. The auditor must not be related to any employees of the company being audited
b. The auditor must not have any financial interest in the company being audited
c. The auditor must not have any business relationships with the company being audited
d. The auditor must have a significant financial stake in the company being audited
4. Which of the following is NOT a type of computer system control?
a.Input controls
b.Processing controls
c.Output controls
d.Feedback controls
21.
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?
Group of answer choices
Request that the manager of the systems development project fix the system
None of the choices
Disregard the control weakness because management previously decided to accept the risk
Discuss the control weakness with the manager of the accounting system, but do not report the finding
Report the control weakness to management and the audit committee
Chapter 10 Solutions
EBK AUDITING AND ASSURANCE SERVICES
Ch. 10 - Prob. 1RQCh. 10 - Define misappropriation of assets and give two...Ch. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - Prob. 12RQCh. 10 - Prob. 13RQCh. 10 - Prob. 14RQCh. 10 - Prob. 15RQCh. 10 - Prob. 16RQCh. 10 - Prob. 17RQCh. 10 - Prob. 18RQCh. 10 - Prob. 19.1MCQCh. 10 - Prob. 19.2MCQCh. 10 - Prob. 19.3MCQCh. 10 - Prob. 20.1MCQCh. 10 - Prob. 20.2MCQCh. 10 - Prob. 20.3MCQCh. 10 - Prob. 21.1MCQCh. 10 - Prob. 21.2MCQCh. 10 - Prob. 21.3MCQCh. 10 - Prob. 22.1MCQCh. 10 - Prob. 22.2MCQCh. 10 - Prob. 22.3MCQCh. 10 - Prob. 23DQPCh. 10 - Prob. 24DQPCh. 10 - Prob. 25DQPCh. 10 - Prob. 27DQPCh. 10 - Prob. 28DQPCh. 10 - Prob. 29DQPCh. 10 - Prob. 31DQPCh. 10 - Each year near the balance sheet date, when the...Ch. 10 - Prob. 33DQPCh. 10 - Prob. 34DQP
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Similar questions
- Which of the following circumstances would most likely pose the greatest risk inaccepting a new audit engagement?(1) Staff will need to be rescheduled to cover this new client.(2) There will be a client-imposed scope limitation.(3) The firm will have to hire a specialist in one audit area.(4) The client’s financial reporting system has been in place for 10 yearsarrow_forwardDuring 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 choicesarrow_forwardThe external auditor of a company has certain requirements due to Sarbanes-Oxley. Which of the following best describes these requirements? A. The auditor is required to only report weaknesses in the internal control design of the company he or she is auditing. B. The auditor must issue an internal control report on the evaluation of internal controls overseen by the Public Company Accounting Oversight Board C. The auditor in charge can serve for a period of only two years. D. The Public Company Accounting Oversight Board reviews reports submitted by the auditors when no evaluations have been performed.arrow_forward
- Reports on Internal Control over Financial Reporting (Report Modifications). Foreach of the following situations, describe how the auditors’ report on internal control overfinancial reporting would be modified from the standard, unqualified report. Do not writethe actual reports.a. The auditors have identified a material weakness in the processing of sales transactions.b. Because a relatively short period of time has passed since a control weakness was remediated, the auditors do not believe that sufficient evidence can be obtained with respect tothe operating effectiveness of the entity’s internal control over financial reporting.c. Component auditors have audited a significant component of the group financial statements, including internal control over financial reporting relating to that component.They did not find a material weakness in internal control, and the group auditor believesthe component auditor’s work can be relied on.d. The auditors believe that the entity’s management…arrow_forwardYour answer is incorrect. During the audit of Millennium Corporation, the audit firm, Tyson CPAs has advised firm management that they plan to confirm a sample of accounts receivable balances with a randomly selected pool of the client's customers. The client has refused permission for the auditors to undertake this procedure, citing customer privacy over balances owed to the firm. At this juncture, what might the auditors decide to do? Ⓒ The auditors are most likely to consider withdrawing from the engagement. If management is uncooperative, it is probably because they are hiding fraud or other material errors. O The auditors are likely to proceed with contacting a sample of accounts receivable customers anyway. As these customers represent third parties, the auditor does not need the client's expressed permission to contact them. O The auditors may attempt perform alternative audit procedures. If they are able to do this, they may be able to offer the same level of assurance in this…arrow_forward24. 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? Group of answer choices Request that the manager of the systems development project fix the system Discuss the control weakness with the manager of the accounting system, but do not report the finding Report the control weakness to management and the audit committee Disregard the control weakness because management previously decided to accept the risk None of the choicesarrow_forward
- Which of the following statements is not true with respect to written representations?a. The failure of management to furnish them is a significant scope limitation, resulting in either an adverse opinion or a disclaimer of opinion.b. They should address management’s responsibility for designing internal control to prevent and detect fraud.c. Auditors use them to corroborate information received during the audit from the client and its employees.d. They are dated the same date as the auditor’s reports.arrow_forwardWhich of the following statements would most likely appear in an auditor's engagement letter? a. Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket expenses. b. The auditor's preliminary assessment of the risk factors relating to misstatements arising from fraudulent financial reporting. c. A reminder that management is responsible for illegal acts committed by employees. d. After performing our preliminary analytical procedures, we will discuss with you the other procedures we consider necessary to complete the engagement. e. Required evidence is needed to issue a qualified opinion.arrow_forwardAs 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.arrow_forward
- 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.arrow_forward1: Additional compliance tests is necessary when an auditor may desire a further reduction in the assessed level of control risk in order to reduce even further the extent of substantive tests to be applied to year-end account balances.$2: Regardless of how low the assessed level of control risk, the acceptable level of detection risk could never be so low as to preclude the need for any substantive tests at all.$3: Material weaknesses are those reportable conditions for which there is more than a relatively moderate risk that the deficiency may result in misstatements that are material to the financial statements. A: Ifall statements are correct. B-If only one statement is correct. C-If only two statements are correct. D- If all statements are incorrect.arrow_forward28. Which of the following would be a red flag that internal auditors should look at for the possibility of inventory fraud?I. The controller has assumed responsibility for approving all payments to certain vendors.II. The controller has continuously delayed installation of a new accounts payable system, despite a corporate directive to implement it.III. Sales commissions are not consistent with the organization's increased levels of sales.IV. Payments to vendors are supported by copies of receiving memos, rather than originals. Group of answer choices I and II only II and III only I, II, and IV only I, II, III, and IV I, III, and IV onlyarrow_forward
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