Question 1 Control: On a monthly basis, the financial analyst performs the reconciliation of the AR subledger data to the general ledger balance. All reconciling items in excess of US$15,000 are investigated and resolved. Deficiency: During our test of control of a sample of 2 months from the first nine months of the audit period, we identified unexplained reconciling items in excess of US$ 15,000 in the reconciliations for the two months selected for testing. This audit is a non-integrated audit of a privately held client. Which of the following actions must be part of our response to this deficiency? Select the correct option and select Submit. 1. Modify our substantive procedures for accounts receivable 2. Extend our procedures to evaluate management's assessment and actions to remediate the control 3. Modify our control risk assessment to "not rely" 4. Test the December reconciliation once management has remediated the control

Question 1 Control: On a monthly basis, the financial analyst performs the reconciliation of the AR subledger data to the general ledger balance. All reconciling items in excess of US$15,000 are investigated and resolved. Deficiency: During our test of control of a sample of 2 months from the first nine months of the audit period, we identified unexplained reconciling items in excess of US$ 15,000 in the reconciliations for the two months selected for testing. This audit is a non-integrated audit of a privately held client. Which of the following actions must be part of our response to this deficiency? Select the correct option and select Submit. 1. Modify our substantive procedures for accounts receivable 2. Extend our procedures to evaluate management's assessment and actions to remediate the control 3. Modify our control risk assessment to "not rely" 4. Test the December reconciliation once management has remediated the control

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

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

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

Chapter8: Specialized Audit Tools: Attributes Sampling, Monetary Unit Sampling, And Data Analytics Tools

Section: Chapter Questions

Problem 31RQSC

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The practice of auditing firms to spread work throughout the year by carrying out as many auditing procedures as practicable before the balance sheet date, in order to minimize the load during the peak period. This is called a. Test of recorded transactions b. Confirmation of receivable and payablesc. Observation and test-check of inventoriesd. Interim work
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Chapter 13: Overall Audit Strategy and Audit Program The following are two situations, all involving non-public companies, in which the auditor is required to develop an audit strategy: 1. The client has inventory at approximately 50 locations in a three state region. This inventory is difficult to count and can be observed only by traveling by car. The internal controls over acquisitions, cash disbursements, and perpetual records are considered effective. This is the fifth year that you have done the audit, and audit results in the past have always been excellent. 2. This is the first year of an audit of a medium sized company that is considering selling its business because of severe under financing. A review of the acquisition and payment cycle indicates that controls over cash disbursements are excellent but controls over acquisitions cannot be considered effective. The client lacks receiving reports and a policy as to the proper timing to record acquisitions. When you…
Listen Time: 8 minutes For the following statements identify the assertion related to the risk of material misstatement. Explain your choice. Statement 1: "I am concerned that several of the significant accounts receivable balances on the Balance Sheet are uncollectible" Statement 2: "I am concerned that several of the revenue transactions that were recorded during the year didn't actually happen" Statement 3: "I am concerned that there is a significant unrecorded liability that should be recorded on the Balance Sheet" Statement 4: "I am concerned that assets that don't actually exist were recored on the Balance Sheet!" BIU Format tv
As a result of analytical procedures an auditor determines that gross profit has declined from 30% to 15% in the current year. The auditor should.. A. Document manamgent intentions with respect to reversing the trend. B. Evaluate managment's performance in causing the deline C. Require a footnote disclosure D. Consider the possibility of an error in the financial statements.
7. Each of the following is a feature of internal control, except a. management planning b. periodic independent verification. C. limited access to assets. d. authorization of transactions. 8. If it takes Gledhill Company 45 days to sell inventory, 23 days to collect from the sale, and creditorm payment terms are 30 days, the financing period is a. 98 days. b. 23 days. C. 45 days d. 38 days.
7. Each of the following is a feature of internal control, except a. management planning. b. periodic independent verification. c. limited access to assets. d. authorization of transactions. 8. If it takes Gledhill Company 45 days to sell inventory, 23 days to collect from the sale, and creditors payment terms are 30 days, the financing period is a. 98 days. b. 23 days c. 45 days. d. 38 days
Cut -off procedures : Select one : O acan be tested at any point in the audit. O bcan only be tested at year-end. O c. apply only to balance sheet accounts. , d. can be tested at interim and rolled forward.
Comprehensive Problem: Monetary Unit Sampling. Zachary Mayo is a new staff accountant participating in his first audit engagement. He has been assigned to the Foley Companyengagement and is examining Foley’s accounts receivable. Foley maintains a computerizedledger of its accounts receivable balances, which are recorded at $5,000,000 and comprise5,560 individual customer accounts.Mayo established the following parameters for use in this year’s audit. In so doing, herelied extensively on parameters established in prior audits:∙ Expected misstatement is established at $100,000, which is the average amount of misstatement identified in the past five audits. During the past year, Foley has experienced agreat deal of turnover among its sales processing personnel and has made some relativelylarge sales that present some unusual revenue recognition issues. In addition, accountsreceivable have increased by almost 15 percent from the prior year.∙ The tolerable misstatement is 10 percent of the…
Current Attempt in Progress An auditor is testing accounts receivable for a client that has 1,000 customers with customer balances that range from $150 to $185,000. The auditor subdivided the receivables into three groups: group 1 has all customers with receivable balances between $185,000 and $100,000, group 2 has all customers with receivable balances between $100,000 and $25,000, and group 3 has all customers with receivable balances less than $25,000. The auditor then randomly selects customers out of each group. This is known as: O random selection. O haphazard selection. O block selection. O stratified sampling.
Risk Identification and Plan of Action Baker Manufacturing uses EAMs in several of its financial systems to capture material transactions. During this year's annual financial audit, the external auditors noticed unusually large gaps in dates of the captured transactions being copied to the audit files. Baker Manufacturing management informed the auditors that the increased transaction processing times caused by the EAMs had forced computer operators to turn off the EAMs to allow the processing of important transactions in a timely fashion. In addition, much maintenance had been performed on key applications during the past year. Required: Outline any potential risks and determine the courses of action the external auditors should follow.