EBK AUDITING+ASSURANCE SERVICES
17th Edition
ISBN: 9780135171219
Author: ARENS
Publisher: PEARSON CO
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Question
Chapter 9, Problem 36DQP
To determine
Identify the audit risk model that relates directly to each of the given risk factors.
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Students have asked these similar questions
Which of the following combinations is a good way to conceal employee fraud but an ineffective means of perpetrating management (financial reporting) fraud?a. Overstating sales revenue and overstating customer accounts receivable balances.b. Overstating sales revenue and overstating bad debt expense.
c. Understating interest expense and understating accrued interest payable.d. Omitting the disclosure information about related-party sales to the president’s relatives at below-market prices.
The following scenarios are taken from actual fraud cases. For each scenario, categorize as primarily indicating (A) An incentive to commit fraud (B) An opportunity to commit fraud or (C) a rationalization for committing fraud. State your reason for your answer in each scenario.
1. Top management of the company closely guards internal financial information, to the extent that even some employees on a "need to know basis" are denied full access.
27. An audit firm has been asked by a client to attend a meeting between the client and its bank where a new bank loan application is to be discussed. According to the Code of Professional Ethics for Accountants, what type of threat to objectivity will be created if the auditor attends this meeting?
a.
Self interest threat
b.
Intimidation threat
c.
None of the options
d.
Self review threat
Chapter 9 Solutions
EBK AUDITING+ASSURANCE SERVICES
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Provide two examples of factors that might...Ch. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQ
Ch. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Prob. 14RQCh. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - Prob. 17RQCh. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - Prob. 20RQCh. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. 25.1MCQCh. 9 - Prob. 25.2MCQCh. 9 - Prob. 25.3MCQCh. 9 - Prob. 26.1MCQCh. 9 - Prob. 26.2MCQCh. 9 - Prob. 26.3MCQCh. 9 - Prob. 27.1MCQCh. 9 - Prob. 27.2MCQCh. 9 - Prob. 27.3MCQCh. 9 - Prob. 28.1MCQCh. 9 - Prob. 28.2MCQCh. 9 - Prob. 28.3MCQCh. 9 - Prob. 29DQPCh. 9 - Prob. 30DQPCh. 9 - Prob. 31DQPCh. 9 - Prob. 33DQPCh. 9 - Prob. 34DQPCh. 9 - Prob. 35DQPCh. 9 - Prob. 36DQPCh. 9 - Prob. 37DQPCh. 9 - Prob. 39C
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Similar questions
- Which of the following would a fraudster perceive as a pressure? A. lack of management oversight B. everyone does it C. living beyond ones means D. lack of an internal audit functionarrow_forwardFor each situation below identify and explain the threat and one fundamental principle that is comprised.- An accountant has compiled the financial statements for a client and was requested to also audit the statements.- The financial director of Baboo Ltd is very aggressive and dismissive of the audit function and audit team- A chartered accountant values a client’s shares and then leads the negotiations on the sale of the client’s company- The chartered accountant fails to report a fraud of a client because the perpetrator is a close friend and he issympathetic to the interest of his friend.arrow_forwardJane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an embezzlement of company funds?arrow_forward
- Below are ten independent risk factors:1. The client lacks sufficient working capital to continue operations.2. The client fails to detect employee theft of inventory from the warehouse becausethere are no restrictions on warehouse access and the client does not reconcileinventory on hand to recorded amounts on a timely basis.3. The company is publicly traded.4. The auditor has identified numerous material misstatements during prior yearaudit engagements.5. The assigned staff on the audit engagement lack the necessary skills to identifyactual errors in an account balance when examining audit evidence accumulated.6. The client is one of the industry’s largest based on its size and market share.7. The client engages in several material transactions with entities owned by familymembers of several of the client’s senior executives.8. The allowance for doubtful accounts is based on significant assumptions made bymanagement.9. The audit program omits several necessary audit procedures.10.…arrow_forward1. Distinguish between exposure and risk. 2. Explain the characteristics of management fraud. 3. Why are the computer ethics issues of privacy, security, and property ownership of interest to accountants? 4. Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect. Please provide me a correct answer and PLEASE NO PLAGIARSIM. Thank you.arrow_forwardFunds are embezzled from a company, what type of fraud was committed and describe the symptoms of fraud that might be evident to an investigator?arrow_forward
- “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_forwardwhom should the auditors contact when they suspect a fraud? a. senior management b. audit committee of the board o directors c. expected perpetrators of the fraud d. either the senior management or the audit committeearrow_forwardFor each of the following situations indicating heightened fraud risk, discuss how a professionally skeptical auditor might interpret the situation. a. The company is not as profitable as its competitors, but it seems to have good products. However, it has a deficiency in internal control over disbursements that makes it subject to management override. b.The company is doing better than its competitors. Although sales are about the same as competitors, net income is significantly more. Management attributes the greater profitability to better control of expenses.arrow_forward
- Consider the scenario in which Brooke Miles, an accounts payable clerk for West Coast Design Inc., misappropriated $48,350 by paying false bills for commodities that were never delivered to the company. It was the clerk's responsibility to open accounts in the names of the phony corporations and pay the cheques at a nearby bank. Describe a fraud-prevention or detection method that may have been used to avoid or identify the scam.arrow_forwardWhich of the following factors creates an opportunity for fraud to be committed in an organization? a. Management demands financial success. b. Poor internal control. c. Commitments tied to debt covenants. d. Management is aggressive in its application of accounting rules.arrow_forwardWhich of the following characteristics is most likely to heighten an auditor’s concernabout the risk of material misstatements due to fraud in an entity’s financial statements?(1) The entity’s industry is experiencing declining customer demand.(2) Employees who handle cash receipts are not bonded.(3) Internal auditors have direct access to the board of directors and the entity’smanagement.(4) The board of directors is active in overseeing the entity’s financial reporting policies.arrow_forward
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