EBK AUDITING+ASSURANCE SERVICES
17th Edition
ISBN: 9780135171219
Author: ARENS
Publisher: PEARSON CO
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Question
Chapter 13, Problem 33DQP
(a).
To determine
Determine why audit B represents maximum reliance that can be placed on internal control and why all
(b).
To determine
Determine why maximum reliance cannot be placed in controls of Audit B and Audit C.
(c).
To determine
Relate the evidence decision with the audits.
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The following are concepts discussedin this chapter:1. Preliminary judgment about 7. Estimated total misstatementmateriality in a segment2. Control risk 8. Planned detection risk3. Risk of fraud 9. Estimate of the combined4. Inherent risk misstatement5. Risk of material misstatements 10. Acceptable audit risk6. Known misstatement 11. Performance materialitya. Identify which items are audit planning decisions requiring professional judgment.b. Identify which items are audit conclusions resulting from application of audit procedures and requiring professional judgment.c. Under what circumstances is it acceptable to change those items in part a. after theaudit is started? Which items can be changed after the audit is 95% completed?
explain .After documenting internal control in an audit engagement, the auditor may perform tests on
Those controls that the auditor plans to rely on.
Those controls in which deficiencies were identified.
Those controls that have a material effect on the financial statement balances.
A random sample of the controls that were reviewed.
The audit risk model includes the four risks listed below. Match the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.
Chapter 13 Solutions
EBK AUDITING+ASSURANCE SERVICES
Ch. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Explain how the calculation and comparison to...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - For each of the eight types of evidence discussed...
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Prob. 16RQCh. 13 - Prob. 17RQCh. 13 - Prob. 18RQCh. 13 - Prob. 19RQCh. 13 - Prob. 20RQCh. 13 - Prob. 21.1MCQCh. 13 - Prob. 21.2MCQCh. 13 - A conceptually logical approach to the auditors...Ch. 13 - Prob. 22.1MCQCh. 13 - Prob. 22.2MCQCh. 13 - Prob. 22.3MCQCh. 13 - Prob. 23.1MCQCh. 13 - b. Substantive analytical procedures are most...Ch. 13 - Prob. 23.3MCQCh. 13 - Prob. 24DQPCh. 13 - Prob. 25DQPCh. 13 - Prob. 26DQPCh. 13 - Prob. 27DQPCh. 13 - Prob. 28DQPCh. 13 - Prob. 29DQPCh. 13 - Prob. 30DQPCh. 13 - Prob. 31DQPCh. 13 - Prob. 32DQPCh. 13 - Prob. 33DQPCh. 13 - Prob. 34DQPCh. 13 - Prob. 35DQP
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- Some audit procedures may be performed before the end of the reporting period. The more the auditor relies on the operating effectiveness of controls in the assessment of risk, the greater is the extent of the auditor’s tests of controls. Group of answer choices True, True True, False False, True False, Falsearrow_forwardThe auditor use the analytical procedure at various stages of audit: 1. Evaluate the operating effectiveness of the internal.control. 2 and 3 only 1, 2 and 3 only 1 and 2 only 1 and 3 only 2. Evaluate each items in the financial statements. 3. To critically analyze the financial statements.arrow_forward1. Which of the following procedures is most appropriately done if the control risk and inherent risk was assessed at a below maximum level where the management does not have effective internal controls in place? * Omit test of controls, then perform substantive testing at year-end Perform tests of controls, then perform substantive testing at year-end Perform tests of controls, then perform substantive testing at an interim period Omit test of controls, then perform substantive testing at an interim period 2. In auditing the financial statements of ESELYU Inc., the management has deliberately precluded you from gathering evidence in one of its cash accounts which you perceive to be material in regards to the audit. Which of the following audit opinion are you most likely to express? * Qualified opinion if the item is material and pervasive Unqualified Opinion if the item is material and…arrow_forward
- 1. What is the primary reason that auditors’ assess internal control? a)To determine the risk of misstatements of accounts. b)To make recommendations for improvements in controls. c)To determine the nature of various accounts. d)To find misstatements in accounts. 2. Tests of controls are designed to determine all of the following, except: a)How consistent the control was applied. b)Whether or not the control was overridden. c)How a control was applied. d)By what means the control was applied. 3. All of the following are possible responses to a pervasive weakness in internal control except: a)Increase the size of a sample for certain tests in the engagement. b)Adding an element of unpredictability to the procedures performed. c)Increasing the level of supervision on the engagement. d)Assign more experienced personnel to the engagement. 4. Which of the following is not a COSO component of internal control? a)Board oversight. b)Control activities. c)Risk assessment. d)Control…arrow_forwardWhen the auditor identifies that a key control absent he/she would most probably: Select one: a. Examine 100% of the population O b. Consider any existing compensating controls c. Conclude that a material weakness or significant deficiency exists. O d. Issue a qualified or disclaimer of opinion on internal controls over financial reportingarrow_forwardWhich two of the following statements regarding the use of analytical procedures of the audit are correct? i. Analytical procedures are used to test the effectiveness of the design of policies. ii. Analytical procedures involves inquiries and observation of routines to obtain evidences. iii. Analytical procedures help to identify unusual fluctuations for investigation. iv. Analytical procedures can assist the auditor in planning other audit procedures. a. iii and iv b. i and ii c. ii and iv d. ii and iiiarrow_forward
- (A) The requirement is to find the best statement concerning an auditor’s assessment of control risk. Answer (A) is correct because assessing control risk may be performed concurrently during an audit with obtaining an understanding of internal control. Answer (B) is incorrect because evidence about the operation of internal control from prior audits is useful in planning and executing the current year’s assessment of control risk. Answer (C) is incorrect because the basis for an auditor’s conclusions about the level of control risk must be documented when at any time control risk is assessed below maximum. Answer (D) is incorrect because a lower level of control risk requires more assurance, not less, that the controls are operating effectively.arrow_forwardAuditors use different types of audit procedures to gather the evidencenecessary to conclude that the risk of material misstatement for each relevant assertion has been reduced to an acceptably low level. List eight different types of procedures auditors can use during an audit of financial statements, and give an example of each.arrow_forwardWhich of the following statements is correct concerning analytical procedures used in planning an audit engagement?a. They often replace the tests of controls that are performed to assess control risk.b. They typically use financial and nonfinancial data aggregated at a high level.c. They usually involve the comparison of assertions developed by management to ratios calculated by an auditor.d. They are often used to develop an auditor’s preliminary judgment about materiality.arrow_forward
- 23. Analytical procedures used to form an overall audit conclusion generally include A. Considering unusual or unexpected account balances that were not previously identified. B. Performing tests of transactions to corroborate management's financial statement assertions. C. Gathering evidence concerning account balances that have not changed from the prior year. D. Retesting controls that appeared to be ineffective during the assessment of control risk.arrow_forwardStatement 1: In first-time audits, the audit program is completed during the planning phase of the audit. Statement 2: The auditor's primary consideration regarding the client's internal controls is the provision of constructive suggestions to management regarding the company's internal controls. a. 1st statement is false, 2nd statement is true b. 1st statement is true, 2nd statement is false c. both statements are true d. both statements are falsearrow_forwardOn the basis of audit evidence gathered and evaluated, an auditor decides to increaseassessed control risk from that originally planned. To achieve an audit risk level (AcAR)that is substantially the same as the planned audit risk level (AAR), the auditor will(1) increase inherent risk. (3) decrease substantive testing.(2) increase materiality levels. (4) decrease planned detection risk.arrow_forward
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