Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 18, Problem 23RQ
To determine
Give three examples, which are significant deficiencies and strong indicators of the existence of a material weakness in internal control.
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If the auditor performing an integrated audit identifies one or more material weaknesses in a nonissuer's internal control, the auditor should:
A.Expand the audit of internal controle to identify deficiencies less severe than material weaknesses.
B. Conclude that the financial statements are materially misstated because of the material weakness in internal control.
C. Disclaim an opinion on internal control.
D. Express an adverse opinion on the entity's internal control.
Under PCAOB standards, when a material weakness exists, the auditors’ report on internal control is most likely to include an opinion that is:
Multiple Choice
qualified.
disclaimer.
unqualified.
adverse.
The ultimate purpose of assessing control risk is to contribute to the auditor’s evaluation of the:
a. Factors that raise doubts about the auditability of the financial statements.
b. Operating effectiveness of internal controls.
c. Risk that material misstatements exist in the financial statements.
d. Possibility that the nature and extent of substantive tests may be reduced.
Chapter 18 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 18 - Prob. 1RQCh. 18 - Prob. 2RQCh. 18 - Prob. 3RQCh. 18 - Prob. 4RQCh. 18 - Prob. 5RQCh. 18 - Prob. 6RQCh. 18 - Prob. 7RQCh. 18 - Prob. 8RQCh. 18 - Prob. 9RQCh. 18 - Prob. 10RQ
Ch. 18 - Prob. 11RQCh. 18 - Prob. 12RQCh. 18 - Prob. 13RQCh. 18 - Prob. 14RQCh. 18 - Prob. 15RQCh. 18 - Prob. 16RQCh. 18 - Prob. 17RQCh. 18 - Prob. 18RQCh. 18 - Prob. 19RQCh. 18 - Prob. 20RQCh. 18 - Prob. 21RQCh. 18 - Prob. 22RQCh. 18 - Prob. 23RQCh. 18 - Prob. 24RQCh. 18 - Prob. 25RQCh. 18 - Prob. 26RQCh. 18 - Prob. 27RQCh. 18 - Prob. 28RQCh. 18 - Prob. 29QRACh. 18 - Prob. 30QRACh. 18 - Prob. 31QRACh. 18 - Prob. 32AOQCh. 18 - Prob. 32BOQCh. 18 - Prob. 32COQCh. 18 - Prob. 32DOQCh. 18 - Prob. 32EOQCh. 18 - Prob. 32FOQCh. 18 - Prob. 32GOQCh. 18 - Prob. 32HOQCh. 18 - Prob. 32IOQCh. 18 - Prob. 32JOQCh. 18 - Prob. 32KOQCh. 18 - Prob. 32LOQCh. 18 - Prob. 33OQCh. 18 - Prob. 34OQCh. 18 - Prob. 35OQCh. 18 - Match the following definitions (or partial...Ch. 18 - Prob. 37PCh. 18 - Prob. 38ITC
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Similar questions
- After obtaining an understanding of an entitiy's internal control, an auditor may assess control risk at the maximum level for some assertions because he A. performs tests of controls to restrict detection risk to an acceptable level. B. identifies internal control policies and procedures that are likely to prevent material misstatements. C. believes the internal control policies and procedures are unlikely to be effective. D. determines that the pertinent internal control components are not well documented.arrow_forwardAfter obtaining an understanding of the client's internal control, the auditor should consider whether A. the evidential matter obtained from the study of the internal control system can provide a reasonable basis for an opinion. B. the projected degree of effectiveness of internal control is justified. C. further testing of internal control procedures is likely to permit further reduction in the assessed level of control risk. D. sufficient knowledge has been obtained about the entity's entire system of internal control.arrow_forwardThe auditor faces a risk that the examination will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on: a. Substantive tests b. Internal control c. Tests of controls d. Statistical analysisarrow_forward
- Which among the following is not a major purpose of onsite fieldwork conducted by the auditor as a part of overall audit process? a. Evaluation of adequacy of internal controls b. Evaluation and identification of risks involved. c. Reviewing procedures and processes d. Testing the compliance with policies and proceduresarrow_forwardOnce the auditor detects a control deficiency, which of the following steps must he or shetake first?a. Perform tests of other controls related to the same assertion as the control deemedineffective.b. Evaluate the severity of the deficiency on the auditor’s control risk assessment for thatassertion.c. Modify the planned substantive procedures as a result of the deficiency.d. Test the deficient control, assuming a maximum level of risk.arrow_forwardWhich of the following statements is correct concerning the understanding of internal control needed by auditors? The auditors must understand the information system, not the accounting system, The auditors must understand monitoring and all preliminary accounting controls, The auditors must have a sufficient understanding to access the risks of material misstatement, The auditors must understand the control environment, risk assessment, and all control activitiesarrow_forward
- The tolerable rate of deviation set by the auditor for tests of controls depends primarily on which of the following? a. The planned risk of assessing control risk too low. b. The dollar amount of substantive misstatements. c. The anticipated cause of the errors. d. The tolerable rate used in audits of other clients in the same industry.arrow_forwardEXPLAIN.Which of the following is not done by an auditor when obtaining an understanding of an entity's internal controls? Identify the types of potential misstatements that can occur. Consider the operating effectiveness of the internal controls. Design substantive tests. Consider factors that affect the risk of material misstatements.arrow_forwardAfter considering the client's internal control the auditors have concluded that it is well designed and is functioning as anticipated. Under these circumstances the auditors would most likely: Cease to perform substantive procedures, Reduce substantive procedures in areas where the internal control was found to be effective, Increase the extent of anticipated analytical procedures, Perform all tests of control to the extent outlined in the preplanned audit programarrow_forward
- The auditor obtains sufficient understanding of the internal control structure to identify reportable conditions. True or false? why?arrow_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_forwardWhich of the following terms best describes the risk that audit procedures will fail to detect material misstatements? a. Control risk. b. Inherent risk. c. Detection risk. d. Audit risk.arrow_forward
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