Bundle: Auditing: A Risk Based-Approach, Loose-leaf Version, 11th + MindTap Accounting, 1 term (6 months) Printed Access Card
11th Edition
ISBN: 9781337734493
Author: JOHNSTONE, Karla M; Gramling, Audrey A.; Rittenberg, Larry E.
Publisher: Cengage Learning
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Question
Chapter 5, Problem 23RQSC
To determine
Introduction:Internal control is the process which is undertaken by the organization to ensure the effectiveness of the financial transactions that are recorded.
To define: Theway by which auditor’s assessment of the control effectiveness affects the audit conduct and design.
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Which of the following statements are correct?
Select which option is correct.
Select one or more:
A.
The level of professional skepticism can be reduced where the auditor has past experience with the entity indicating the honesty and integrity of management.
B.
Professional skepticism implies an expectation of fraud or error, so is a biased viewpoint.
C.
The level of professional skepticism needs to be maintained throughout the whole engagement.
D.
Professional skepticism is not important in considering management's explanations for unusual trends
Which of the following are indicators of a high-risk or low-risk profile client? Explain?
Poor recent or forecast performance
Significant control weaknesses
Well-financed
Conservative, prudent accounting policies
Competent, honest management
Significant unexplained transactions or transactions with connected companies
Why do you think that inherent and control risk is responsible for the audited company(client) and detection risk belongs to auditors?
Companies of all sizes try to reduce business risks, create disaster recovery plans, and also purchase insurance for what they cannot completely control. Therefore, the business risk is the risk that:
Select one:
a.The auditor will give an inappropriate auditor’s opinion when the financial report is materially misstated
b.The entity’s business objectives will not be attained due to the external and internal environment affecting the entity and the industry in which it operates.
c.
An error will occur given the environmental characteristics of the account balance.
d.The auditor will be exposed to loss to their professional practice from litigation or adverse publicity arising in connection with an audit.
Chapter 5 Solutions
Bundle: Auditing: A Risk Based-Approach, Loose-leaf Version, 11th + MindTap Accounting, 1 term (6 months) Printed Access Card
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Ch. 5 - Prob. 11CYBKCh. 5 - Prob. 12CYBKCh. 5 - Prob. 13CYBKCh. 5 - Prob. 14CYBKCh. 5 - Prob. 15CYBKCh. 5 - Which of the following accounts would not be...Ch. 5 - Prob. 17CYBKCh. 5 - Prob. 18CYBKCh. 5 - Prob. 19CYBKCh. 5 - Which management assertion is usually most...Ch. 5 - Prob. 21CYBKCh. 5 - Prob. 22CYBKCh. 5 - Prob. 23CYBKCh. 5 - Prob. 24CYBKCh. 5 - Prob. 25CYBKCh. 5 - Prob. 26CYBKCh. 5 - Prob. 27CYBKCh. 5 - Prob. 28CYBKCh. 5 - Prob. 29CYBKCh. 5 - Prob. 30CYBKCh. 5 - Prob. 31CYBKCh. 5 - Prob. 32CYBKCh. 5 - Prob. 33CYBKCh. 5 - Prob. 34CYBKCh. 5 - Prob. 35CYBKCh. 5 - Prob. 36CYBKCh. 5 - Prob. 37CYBKCh. 5 - Prob. 38CYBKCh. 5 - Prob. 39CYBKCh. 5 - Prob. 40CYBKCh. 5 - Prob. 41CYBKCh. 5 - Prob. 42CYBKCh. 5 - Prob. 43CYBKCh. 5 - Prob. 44CYBKCh. 5 - Prob. 45CYBKCh. 5 - Prob. 46CYBKCh. 5 - Prob. 47CYBKCh. 5 - Prob. 48CYBKCh. 5 - Prob. 1RQSCCh. 5 - Prob. 2RQSCCh. 5 - Prob. 3RQSCCh. 5 - Prob. 4RQSCCh. 5 - Prob. 5RQSCCh. 5 - Prob. 6RQSCCh. 5 - Professional guidance indicates that the auditor...Ch. 5 - Identify the accounts associated with the...Ch. 5 - Assume that an organization asserts that it has...Ch. 5 - Prob. 10RQSCCh. 5 - Prob. 11RQSCCh. 5 - Prob. 12RQSCCh. 5 - Prob. 13RQSCCh. 5 - List factors that might affect an audit firm’s...Ch. 5 - Prob. 15RQSCCh. 5 - Prob. 16RQSCCh. 5 - Prob. 17RQSCCh. 5 - Prob. 18RQSCCh. 5 - Prob. 19RQSCCh. 5 - Prob. 20RQSCCh. 5 - Prob. 21RQSCCh. 5 - Prob. 22RQSCCh. 5 - Prob. 23RQSCCh. 5 - Prob. 24RQSCCh. 5 - Prob. 25RQSCCh. 5 - Prob. 26RQSCCh. 5 - Prob. 27RQSCCh. 5 - Prob. 28RQSCCh. 5 - Prob. 29RQSCCh. 5 - Prob. 30RQSCCh. 5 - Prob. 32RQSCCh. 5 - Prob. 33RQSCCh. 5 - Prob. 34RQSCCh. 5 - Prob. 35RQSCCh. 5 - Prob. 36RQSCCh. 5 - Prob. 37RQSCCh. 5 - Prob. 38RQSCCh. 5 - Prob. 39RQSCCh. 5 - Prob. 40RQSCCh. 5 - Prob. 42RQSCCh. 5 - Prob. 43RQSCCh. 5 - Prob. 44FF
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Similar questions
- “The deliberate fraud committed by management that injures investors and creditors through materially misleading financial statements. The use of incentive systems and opportunities for fraudulent behavior are associated with higher fraud risk assessments by audit partners; however, the most important factors are senior management ethical attitudes and dishonest communication from management with the external auditor.” Required: Compare and contrast financial statement fraud with asset misappropriation. Why is it important to analyze the relationship between a company and its auditors?arrow_forwardManagement fraud (fraudulent financial reporting) is not the expected norm, but it happens from time to time. In the United States, several cases have been widely publicized. They happen when motives and opportunities overwhelm managerial integrity.a. What distinguishes management fraud from a defalcation?b. What are an auditor’s responsibilities under auditing standards to detect management fraud?c. What are some characteristics of management fraud that an audit team should consider to fulfill the responsibilities under auditing standards?d. What factors might an audit team notice that should heighten the concern about the existence of management fraud?e. Under what circumstances might an audit team have a duty to disclose management’s frauds to parties other than the company’s management and its board of directors?arrow_forwardAuditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case Which threat may occur when, because of a close relationship, a professional accountant becomes too sympathetic to the interests of others? Self-review threats Self-interest threats Advocacy threats Familiarity threatsarrow_forward
- Jamie is an auditor. While preparing to audit his client, FoodCourt, he finds a weakness in the company's internal control that might suggest that the company has a higher than normal risk, and revenue may have been recorded in the wrong period. Given this weakness, what information should be communicated to management?arrow_forwardAuditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case Which threat may occur when a professional accountant may be deterred from acting objectively by threats, actual or perceived? Intimidation threats Advocacy threats Self-review threats Self-interest threatsarrow_forwardExplain how the circumstances under each of the following might reflect failed leadership by auditors and the audit firm: • Under-reporting of time on an engagement• Premature sign-off on audit procedures• Accepting weak client explanations for accountingarrow_forward
- Auditors are important because they are able to provide assurance of an organization's financial statements from an objective and independent opinion. It benefits the company in several ways, such as maintaining consistency, finding errors in their processing, or detecting fraud. While performing work , the auditors may face situations when they will not be able to fulfill ethical requirements. Answer the following three questions based on the above case 32. Which threat may occur when a professional accountant may be deterred from acting objectively by threats, actual or perceived? a. Self-review threats b. Advocacy threats c. Intimidation threats d. Self-interest threatsarrow_forwardSome auditors claim that increased exposure under creates a litigation environment that is unfairly risky for auditors. Do you think that the inability of auditors to detect a financial statement misstatement due to gross deficiencies in internal controls over financial reporting should expose auditors to litigation? Why or why not? Include reference to appropriate ethical standards in your response.arrow_forwardWith respect to fraudulent financial reporting, which one of the following statements is not correct? a.The risk that the auditor will not detect misstatement due to management fraud is greater than those due to employee fraud. b.It is difficult for the auditor to determine if misstatements in accounting estimates are caused by fraud or error. c.When the audit is properly planned and performed in accordance with ISAs, material misstatements are guaranteed to be detected by the auditor. d.Excessive pressure on management to meet expectations of third parties creates incentives forarrow_forward
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