9-34 (OBJECTIVES 9-5, 9-7, 9-8) John Peter is planning the audit of the investments account for ABC Company. ABC invests excess cash at the end of the summer sales season through an investment manager who invests in equity and debt securities for ABC's account. John has assessed the following risks as low, medium, or high for the relevant balance-related audit objectives in the investment account. Risk of Material Misstatements Planned Acceptable Audit Risk Balance-Related Inherent Risk Control Risk Detection Risk Audit Objectives Existence Medium Medium Medium Medium Low Medium Completeness Medium High Low Accuracy Low Classification Medium Low Medium Medium Low Cut-off Low Medium Low Detail tie-in Medium High Medium Realizable value Low Rights and obligations Medium Low a. Describe each of the four identified risks in the columns of the table above. b. Fill in the blanks for planned detection risk for each balance-related audit objective using the terms low, medium, or high. c. Which audit objectives require the greatest amount of evidence and which require the least? Required d. Through audit testing. John finds that the investment manager's controls over re- cording purchases and sales of securities are not as effective as originally assessed. What should John do?
9-34 (OBJECTIVES 9-5, 9-7, 9-8) John Peter is planning the audit of the investments account for ABC Company. ABC invests excess cash at the end of the summer sales season through an investment manager who invests in equity and debt securities for ABC's account. John has assessed the following risks as low, medium, or high for the relevant balance-related audit objectives in the investment account. Risk of Material Misstatements Planned Acceptable Audit Risk Balance-Related Inherent Risk Control Risk Detection Risk Audit Objectives Existence Medium Medium Medium Medium Low Medium Completeness Medium High Low Accuracy Low Classification Medium Low Medium Medium Low Cut-off Low Medium Low Detail tie-in Medium High Medium Realizable value Low Rights and obligations Medium Low a. Describe each of the four identified risks in the columns of the table above. b. Fill in the blanks for planned detection risk for each balance-related audit objective using the terms low, medium, or high. c. Which audit objectives require the greatest amount of evidence and which require the least? Required d. Through audit testing. John finds that the investment manager's controls over re- cording purchases and sales of securities are not as effective as originally assessed. What should John do?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:9-34 (OBJECTIVES 9-5, 9-7, 9-8) John Peter is planning the audit of the investments account for
ABC Company. ABC invests excess cash at the end of the summer sales season through an
investment manager who invests in equity and debt securities for ABC's account. John has
assessed the following risks as low, medium, or high for the relevant balance-related audit
objectives in the investment account.
Risk of Material Misstatements
Planned
Acceptable
Audit Risk
Balance-Related
Inherent Risk
Control Risk
Detection Risk
Audit Objectives
Existence
Completeness
Medium
Medium
Medium
Medium
Low
Medium
Accuracy
Low
High
Medium
Classification
Medium
Low
Low
Medium
Medium
Low
Cut-off
Low
Medium
Low
Detail tie-in
Realizable value
Low
High
Medium
Rights and obligations
Medium
Medium
Low
a. Describe each of the four identified risks in the columns of the table above.
b. Fill in the blanks for planned detection risk for each balance-related audit objective
using the terms low, medium, or high.
c. Which audit objectives require the greatest amount of evidence and which require
the least?
d. Through audit testing, John finds that the investment manager's controls over re-
cording purchases and sales of securities are not as effective as originally assessed.
What should John do?
Required
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