a) Explanation Closely investigating the given data, there are certain points which needs to be mentioned. Inventory usage is around 60% while sales increase is only 10% that is potential risk It means that the Inventory is blocked and not getting utilized in sale generation. Auditor needs to investigate the Physical inventory and ensure the completeness of the Inventory... b) To determine Introduction: Potential Skepticism is the alertness factor of the working style of an Auditor who is prepared to handle any probable misstatement during the course of audit. To Explain: The data which compels the auditor to use professionalism level while exercising in audit.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN: 9781305080577

Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher: South-Western College Pub

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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 7, Problem 49RSCQ

To determine

Introduction: Potential risk is the risk which is an expected in an action by the Auditor. This risk is the damage factor to the genuineness of the operations of a client.

To Explain:The potential risk areas and explanation for these risk areas and the description of potential risk areas affecting the audit engagement.

To determine

Introduction: Potential Skepticism is the alertness factor of the working style of an Auditor who is prepared to handle any probable misstatement during the course of audit.

To Explain:The data which compels the auditor to use professionalism level while exercising in audit.

Expert Solution & Answer

Chapter 7 Solutions

Auditing: A Risk Based-Approach to Conducting a Quality Audit

Ch. 7 - Prob. 1TFQ Ch. 7 - Prob. 2TFQ Ch. 7 - Prob. 3TFQ Ch. 7 - Prob. 4TFQ Ch. 7 - Prob. 5TFQ Ch. 7 - Prob. 6TFQ Ch. 7 - Prob. 7TFQ Ch. 7 - Prob. 8TFQ Ch. 7 - Prob. 9TFQ Ch. 7 - Prob. 10TFQ

Ch. 7 - Prob. 11TFQ Ch. 7 - Prob. 12TFQ Ch. 7 - Prob. 13TFQ Ch. 7 - In terms of the timing of the risk response, the...Ch. 7 - Prob. 15MCQ Ch. 7 - Prob. 16MCQ Ch. 7 - Prob. 17MCQ Ch. 7 - Prob. 18MCQ Ch. 7 - Prob. 19MCQ Ch. 7 - Prob. 20MCQ Ch. 7 - Prob. 21MCQ Ch. 7 - Prob. 22MCQ Ch. 7 - Prob. 23MCQ Ch. 7 - Prob. 24MCQ Ch. 7 - Prob. 25MCQ Ch. 7 - Prob. 26MCQ Ch. 7 - Prob. 27MCQ Ch. 7 - Prob. 28MCQ Ch. 7 - Prob. 29RSCQ Ch. 7 - Prob. 30RSCQ Ch. 7 - Define the following terms: (a) performance...Ch. 7 - Prob. 32RSCQ Ch. 7 - Prob. 34RSCQ Ch. 7 - Prob. 35RSCQ Ch. 7 - Prob. 36RSCQ Ch. 7 - How does inherent risk relate to internal...Ch. 7 - Prob. 38RSCQ Ch. 7 - Prob. 39RSCQ Ch. 7 - Prob. 40RSCQ Ch. 7 - Prob. 43RSCQ Ch. 7 - Prob. 45RSCQ Ch. 7 - Prob. 46RSCQ Ch. 7 - Prob. 47RSCQ Ch. 7 - Prob. 48RSCQ Ch. 7 - Prob. 49RSCQ Ch. 7 - Prob. 52RSCQ Ch. 7 - Prob. 53RSCQ Ch. 7 - Prob. 54RSCQ Ch. 7 - Prob. 55RSCQ Ch. 7 - Prob. 56RSCQ Ch. 7 - Prob. 57RSCQ Ch. 7 - Prob. 58FF

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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.
A study investigated the relationship between audit delay (the length of time from a companys fiscal year-end to the date of the auditors report) and variables that describe the client and the auditor. Some of the independent variables that were included in this study follow: A sample of 40 companies provided the following data: a. Develop the estimated regression equation using all of the independent variables included in the data. b. Test for an overall regression relationship at the 0.05 level of significance. Is there a significant regression relationship? c. 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? d. 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. e. On the basis of your observations about the relationships between the dependent variable Delay and the independent variables Quality and Finished, suggest an alternative regression equation to the model developed in part a to explain as much of the variability in Delay as possible.
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.

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