Connect Access Card for Principles of Auditing & Other Assurance Services
21st Edition
ISBN: 9781260299366
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Chapter 13, Problem 32FOQ
To determine
Identify the appropriate answer related to the policy for strengthening the internal control over heavy mobile equipment.
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Which of the following statements would most likely appear in an auditor's engagement letter?
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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.
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Internal controls do each of the following except:
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Chapter 13 Solutions
Connect Access Card for Principles of Auditing & Other Assurance Services
Ch. 13 - Prob. 1RQCh. 13 - K-J Corporation has current assets of 5 million...Ch. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Explain the use of a system of authorizations for...Ch. 13 - Moultrie Company discovered recently that a number...Ch. 13 - Does a failure to record the retirement of...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Gibson Manufacturing Company acquired new factory...Ch. 13 - Prob. 17RQCh. 13 - Do the auditors question the service lives adopted...Ch. 13 - Prob. 19RQCh. 13 - Explain how the existence of lease agreements may...Ch. 13 - Prob. 21RQCh. 13 - Prob. 22QRACh. 13 - Prob. 23QRACh. 13 - Gruen Corporation is a large diversified company...Ch. 13 - Prob. 25QRACh. 13 - Prob. 26QRACh. 13 - Prob. 27QRACh. 13 - Prob. 28QRACh. 13 - Prob. 29QRACh. 13 - Prob. 30QRACh. 13 - Prob. 31QRACh. 13 - To assure accountability for fixed-asset...Ch. 13 - Prob. 32BOQCh. 13 - Which of the following is an internal control...Ch. 13 - Which of the following accounts should be reviewed...Ch. 13 - Prob. 32EOQCh. 13 - Prob. 32FOQCh. 13 - Which of the following statements is not typical...Ch. 13 - Prob. 32HOQCh. 13 - Prob. 32IOQCh. 13 - An effective procedure for identifying unrecorded...Ch. 13 - Which of the following is not an overall test of...Ch. 13 - Prob. 32LOQCh. 13 - Prob. 33OQCh. 13 - Analysis of which account is least likely to...Ch. 13 - Prob. 34BOQCh. 13 - Prob. 34COQCh. 13 - Prob. 34DOQCh. 13 - A search for overstated property, plant, and...Ch. 13 - The following are typical questions that might...Ch. 13 - Prob. 36PCh. 13 - Prob. 37PCh. 13 - Chem-Lite, Inc., maintains its accounts on the...Ch. 13 - Prob. 39PCh. 13 - You are reviewing the property, plant, and...
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- Assume that management is gathering evidence as part of its process for assessing the effectiveness of internal control over financial reporting. The company is a manufacturer of high-dollar specialized Control Tested machines used in the medical profession. The following table identifies important controls that management is testing regarding accounts related to revenue recognition, accounts receivable, and other sales related activities. The first column describes the control, and the second column describes the test results. Based on the test results, determine the conclusion that management should likely make about the deficiency. (Is it a control deficiency, a significant deficiency, or a material weakness?)arrow_forwardResponsibilities 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…arrow_forwardIn a fraud examination, original documents must be protected from damage and tampering toa. Establish motive.b. Develop documentation for employee dismissal.c. Protect the chain of custody.d. Ensure that suspects are unaware of an investigation in progressarrow_forward
- This is a process of evaluating the effectiveness of a client's internal controls in preventing or detecting material misstatements in the financial statements is called __________________ (answer in All CAPS)arrow_forwardRachel, a CPA, is engaged to audit the financial statements of Nestor Company for the year ended December31, 20x1. Rachel obtained and documented an understanding of internal control relating to the purchasingprocess and set control risk at the maximum level. Rachel requested and obtained from Nestor a scheduleanalyzing prepaid insurance as of December 31, 20x1, and sent a confirmation request to Nestor’s broker. a. What substantive procedures should Rachel conduct in verifying the schedule of prepaid insurance and inresponding appropriately to the following assertions? 1) Existence and completeness2) Rights and obligations3) Valuation or allocation4) Presentation and disclosure b. What is the importance of the audit evidence gathered from the audit procedures?arrow_forwardThe internal control procedures in Dayton Company result in the following provisions.Identify the principles of internal control that are being followed in each case. (a) Employees who have physical custody of assets do not have access to the accounting records. Select the principle of internal control Human resource controlsSegregation of dutiesEstablishment of responsibilityPhysical controlsIndependent internal verificationDocumentation procedures (b) Each month, the assets on hand are compared to the accounting records by an internal auditor. Select the principle of internal control Establishment of responsibilityHuman resource controlsPhysical controlsIndependent internal verificationDocumentation proceduresSegregation of duties (c) A prenumbered shipping document is prepared for each shipment of goods to customers. Select the principle of…arrow_forward
- When planning the audit of internal controls for an issuer, the audit team shoulda. Identify significant accounts, locations, and assertions.b. Conduct a walkthrough of the internal control process.c. Make inquiries of employees regarding the existence of control activities.d. Reperform control activities performed by client employees to determine theireffectiveness.arrow_forwardResponsibilities 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,…arrow_forwardWhich of the following controls will most likely justify a reduced assessed level ofcontrol risk for the existence assertion for equipment?(1) Internal auditors periodically select equipment items in the fixed assets masterfile and locate the related equipment on company premises.(2) Department heads are asked to provide information to the accounting department each quarter about any equipment no longer in use or somewhat damaged.(3) All contracts of equipment purchases are reviewed by both the controller andattorney to verify that legal title transfers to the client and that none representoperating leases.(4) As part of quarterly and annual inventory physical counts, factory equipment islisted and subsequently reconciled to the fixed asset master file.arrow_forward
- Identify important internal control activities present in a properly designed system to mitigate the risk of material misstatements for each relevant assertion related to cash and to help prevent or detect employee fraud.arrow_forwardIn making client acceptance and continuance decisions, the auditor will perform various procedures in assessing the client. Which of these would most likely not be one of those procedures? a. obtain background checks on management to assess management integrity b. review regulatory filings and examination reports c. analyze client financial statements and compare to industry metrics d. submit management to a lie detector testarrow_forwardAn 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.arrow_forward
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