Explanation Material misstatement: Risk assessment procedures performed by the auditors is aimed at identifying any misstated information in the financial statements that will lead to any fraud if not audited then it is called the material misstatement of financial records. Some matters are indispensable for the fair representation of the financial statements and to keep the financial statements free from any such material misstatement audit is performed. The risk of material misstatement: Risk of material misstatement arises when the financial statement carries the misstatement before the audit. This could result in two cases, inherent risk and control risk. Fraud: The Integrity and Objectivity Rule described by the code of professional conduct, AICPA stipulates the member shall not misrepresent the facts knowingly otherwise under this provision the accountant shall be brought under the lawsuit for fraud. Effect on the risk of material misstatement and fraud due to the given factors: Factors Effect on material misstatement Risk of fraud yes or no a. NFB is a continuing audit client. Decrease No b. The banking industry has been significantly impacted by the downturn in the economy in recent years. Increase Yes c. NFB operates in a growing, prosperous area and has remained profitable over the years...

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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Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and appl…

Question

Chapter 6, Problem 39OQ

To determine

Identify whether the given factors will increase or decrease the risk of material misstatement and whether it will create the risk of fraud.

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Chapter 6, Problem 38LOQ

Chapter 6, Problem 40OQ

Chapter 6 Solutions

Connect Access Card for Principles of Auditing & Other Assurance Services

Ch. 6 - Prob. 1RQ Ch. 6 - Prob. 2RQ Ch. 6 - Prob. 3RQ Ch. 6 - Discuss what is meant by the phrase shopping for...Ch. 6 - Prob. 5RQ Ch. 6 - Prob. 6RQ Ch. 6 - Prob. 7RQ Ch. 6 - Prob. 8RQ Ch. 6 - Prob. 9RQ Ch. 6 - Prob. 10RQ

Ch. 6 - Prob. 11RQ Ch. 6 - Prob. 12RQ Ch. 6 - Prob. 13RQ Ch. 6 - Prob. 14RQ Ch. 6 - Prob. 15RQ Ch. 6 - What is meant by making a proper year-end cutoff?...Ch. 6 - Prob. 17RQ Ch. 6 - Prob. 18RQ Ch. 6 - Prob. 19RQ Ch. 6 - Prob. 20RQ Ch. 6 - Auditing standards require the auditors to have a...Ch. 6 - Prob. 22RQ Ch. 6 - Prob. 23RQ Ch. 6 - Prob. 24QRA Ch. 6 - Prob. 25QRA Ch. 6 - Prob. 26QRA Ch. 6 - Prob. 27QRA Ch. 6 - Prob. 28QRA Ch. 6 - Prob. 29QRA Ch. 6 - Prob. 30QRA Ch. 6 - Prob. 31QRA Ch. 6 - Prob. 32QRA Ch. 6 - Prob. 33QRA Ch. 6 - Prob. 34QRA Ch. 6 - Prob. 35QRA Ch. 6 - Prob. 36QRA Ch. 6 - Prob. 37QRA Ch. 6 - Prob. 38AOQ Ch. 6 - Prob. 38BOQ Ch. 6 - Prob. 38COQ Ch. 6 - Prob. 38DOQ Ch. 6 - Prob. 38EOQ Ch. 6 - Prob. 38FOQ Ch. 6 - Prob. 38GOQ Ch. 6 - Prob. 38HOQ Ch. 6 - Prob. 38IOQ Ch. 6 - Prob. 38JOQ Ch. 6 - Prob. 38KOQ Ch. 6 - Prob. 38LOQ Ch. 6 - Prob. 39OQ Ch. 6 - Prob. 40OQ Ch. 6 - Prob. 41OQ Ch. 6 - Prob. 42AOQ Ch. 6 - Prob. 42BOQ Ch. 6 - Prob. 42COQ Ch. 6 - Tracing from source documents to journals most...Ch. 6 - Vouching from journals (or ledgers) to source...Ch. 6 - For each definition (or portion of a definition)...Ch. 6 - Prob. 44P Ch. 6 - Prob. 45P Ch. 6 - Tammy Potter, a new partner with the regional CPA...

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A study investigated the relationship between audit delay (the length of time from a company’s fiscal year-end to the date of the auditor’s report) and variables that describe the client and the auditor. Some of the independent variables that were included in this study follow: Industry A dummy variable coded 1 if the firm was an industrial company or 0 if the firm was a bank, savings and loan, or insurance company. Public A dummy variable coded 1 if the company was traded on an organized exchange or over the counter: otherwise coded 0. Quality A measure of overall quality of internal controls, as judged by the auditor, on a 5-point scale ranging from “virtually none” (1) to “excellent” (5). Finished A measure ranging from 1 to 4, as judged by the auditor, where 1 indicates “all work performed subsequent to year-end” and 4 indicates “most work performed prior to year-end.” A sample of 40 companies provided the following data: Develop the estimated regression equation using all of the independent variables included in the data. How much of the variation in the sample values of delay does this estimated regression equation explain? What other independent variables could you include in this regression model to improve the fit? Test the relationship between each independent variable and the dependent variable at the 0.05 level of significance, and interpret the relationship between each of the independent variables and the dependent variable. On the basis of your observations about the relationships between the dependent variable Delay and the independent variables Quality and Finished, suggest an alternative model for the regression equation developed in part (a) to explain as much of the variability in Delay as possible.
The 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.
Professional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements. a. Identify the activities that affect the revenue cycle. b. Identify the financial statement accounts typically associated with the revenue cycle.

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