Week 3 Cover Page and Discussion Questions

Statement 1: As part of obtaining an understanding of internal control, an auditor is required to obtain knowledge about the operating effectiveness of internal control.   Statement 2:  The auditor obtains an understanding of internal controls to identify the types of potential misstatements that may occur.   Group of answer choices A. False, true B. True, false C. False, false D. True, true

Problem 6:  Planning the audit is essential for a. obtaining sufficient, appropriate evidence b. keeping costs reasonable to the client c. avoiding a misunderstanding with a client. Elaborate on each step below for the auditor’s objective in achieving the above essential elements. Discuss in detail what each step consists of and give an example for each. Accept the client and perform initial audit planning Understand the client's business and industry Assess client business risk Perform preliminary analytical procedures Set materiality levels and assess acceptable audit risk and inherent risk Understand internal control and assess control risk Gather information to assess fraud risks Develop overall audit plan and program

Analytical procedures issued in the planning stage of an audit, generally_______ Select one:   a. All of the others b. Directs attention to potential risk areas c. Helps to determine the nature, timing and extent of other audit procedures. d. Indicates important aspects of business

1. List three reasons management may ask for an operational audit to be performed and explain how the audit program would be impacted by each of them. 2. Explain the importance of identifying risk factors and using them during the planning phase. 3. Give two examples where document inspection is a useful technique to examine operational risks and related controls. 4. Explain professional skepticism and why it is important for all auditors. 5. Explain the acronym CCCER. 6. What are the defining characteristics of persuasive audit evidence? 7. What are the key characteristics of well prepared working papers? 8. What do internal auditors mean when they refer to the nature, extent, and timing of audit procedures? 9. What information should be included in a well designed final assurance engagement communication? 10. What actions regarding assurance engagement observations must the internal audit function take after the final engagement communication is disseminated?

Question 1 The evidence that is gathered by an auditor plays a crucial role in the results of the audit and the recommendations that are provided to management. When gathering evidence with regard to financial misstatements, the auditor is presented with 3 types of misstatements that could occur at financial statement and assertion level. You are required to discuss these misstatements.

Identify the correct order of steps for an auditor when applying a top-down approach to select controls to test in an integrated audit. Evaluation of overall risks at the financial statement level. II. Evaluation of accounts, disclosures, and assertions for which there is a reasonable possibility of material misstatement. III. Consideration of controls at the entity level. L OA. I, II, III OB. III, I, II OC. I, II, II OD. II, II, I

To obtain an understanding of a continuing client in planning an audit, an auditor most liky would; A. Perform test of details of transactions and balances B. Read internal audit reports. C. Read Specialized industry journals. D. Reevaluate the risks of material misstatement

Question 9 In making a decision of whether to take on a new audit client, the auditor should perform all of the following except: 1. Reviewing the credit rating of the proposed client. 2. Performing preliminary tests of internal controls. 3. Evaluating the firm's ability to service the client properly. 4. Inquiring of third parties as to the reputation of the proposed client. 3 O 1 O 2 O 4

3. An auditor can receive one of three types of report from a Service Organizations when providing Assurance or Auditing services for a client. A Type 2 or SOC 2 service auditor's report addresses: Group of answer choices   Only management's description and design of its controls.   Management's description and design of its controls and control operating effectiveness.   Only control operating effectiveness.   Control operating effectiveness and primary assertion reliability.

The audit risk model includes the four risks listed below. Match the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.

The use of an audit engagement letter is the best method of assuring the auditor will have which of the following?Select one: a. Cooperation from other auditors b. Auditor will obtain sufficient appropriate audit evidence. c. Access to all books, accounts and vouchers required for audit purpose d. Management representation letter

Audit situations 1 through 10 present various independent factual situations an auditor might encounter in conducting an audit. List A represents the types of opinions the auditor ordinarily would issue, and List B represents the report modifications (if any) that would be necessary. For each situation, select one response from List A and one from List B. Select, as the best answer for each item, the action the auditor normally would take. Items from either list may be selected once, more than once, or not at all.   Assume the following: The auditor is independent The auditor previously expressed an unqualified opinion on the prior-year financial statements unless otherwise noted Only single-year (not comparative) statements are presented for the current year (unless otherwise stated) The conditions for an unqualified opinion exist unless contradicted in the factual scenario The conditions stated in the factual scenario are material No report modifications are to be made except in…