What are the similarities and differences among the three main types of audits. Revenue Service Auditors.) Three main types of audits are Purpose: To determine whether the client is following specific procedures set by a higher authority Operational Compliance Financial statement To determine whether the overall financial statements are presented in accordance with specified criteria (usually GAAP) To evaluate whether operating procedures are efficient and effective X Users of audit report: Different groups for different purposes-many outside entities Management of organization Authority that established rules, regulations, and procedures, either internal or external Nature: Highly nonstandard; often subjective Highly standardized Not standardized, but specific and usually objective Frequency of audits performed by: CPAs GAO auditors IRS auditors Internal auditors X X X X X X X X X Never Never Almost always Never Almost always Never Never Almost always Never Almost always Almost always Never A

What are the similarities and differences among the three main types of audits. Revenue Service Auditors.) Three main types of audits are Purpose: To determine whether the client is following specific procedures set by a higher authority Operational Compliance Financial statement To determine whether the overall financial statements are presented in accordance with specified criteria (usually GAAP) To evaluate whether operating procedures are efficient and effective X Users of audit report: Different groups for different purposes-many outside entities Management of organization Authority that established rules, regulations, and procedures, either internal or external Nature: Highly nonstandard; often subjective Highly standardized Not standardized, but specific and usually objective Frequency of audits performed by: CPAs GAO auditors IRS auditors Internal auditors X X X X X X X X X Never Never Almost always Never Almost always Never Never Almost always Never Almost always Almost always Never A

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

Chapter7: Planning The Audit: Identifying, And Responding To The Risk Of Material Misstatement

Section: Chapter Questions

Problem 34RSCQ

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Professional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements. a. Identify the activities that affect the revenue cycle. b. Identify the financial statement accounts typically associated with the revenue cycle.
Auditing includes all of the following except:a. A systematic process.b. An objective obtaining and evaluating evidence concerning assertions about economic actions andevents.c. Ascertain degree of correspondence between assertions and financial statements.d. Communicate audit results to interested users. The following are the three types of audits according to subject matter, excepta. Financial statements auditsb. Operational auditsc. Compliance auditsd. External audits The following are the three types of audits according to auditor, excepta. External auditsb. Internal auditsc. Governmental auditsd. Performance audits The following statements relate to auditing in general. Which is false?a. Compliance audits and independent financial statement audits are similar in nature.b. Evaluating the efficiency and effectiveness—which depends on how they are defined—of operationsof an entity is subjective.c. Both a and bd. Neither a nor b
The following are the three types of audits according to subject matter, excepta. Financial statements auditsb. Operational auditsc. Compliance auditsd. External audits The following are the three types of audits according to auditor, excepta. External auditsb. Internal auditsc. Governmental auditsd. Performance audits The following statements relate to auditing in general. Which is false?a. Compliance audits and independent financial statement audits are similar in nature.b. Evaluating the efficiency and effectiveness—which depends on how they are defined—of operationsof an entity is subjective.c. Both a and bd. Neither a nor b
Audit standards distinguish auditors’ responsibility for planning procedures for detecting noncompliance with laws and regulations havinga direct effect on financial statements versus planning procedures for detecting noncompliance with laws and regulations that do not have a direct effect on financial statements.Required:a. What are the requirements for auditors to plan procedures to detect direct-effect compliance versus indirect-effect compliance?b. For each of the following instances of noncompliance, explain why they are either directeffect (D) or indirect-effect (I) noncompliance:1. A manufacturer inflates expenses on its corporate tax return.2. A retailer pays men more than women for performing the same job. 3. A coal mining company fails to place proper ventilation in its mines.4. A military contractor inflates the overhead applied to a combat vehicle.5. An insurance company fails to maintain required reserves for losses.6. An exporter pays a bribe to a foreign government…
The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk. b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelated. (AICPA, adapted)
In the auditing process Select one: a. the criteria for evaluating information will not vary depending on the information being audited. b. the audit report communicates the auditor's findings to users. c. the types and amounts of evidence remain constant from audit to audit d. evidence are gathered by the auditor to determine whether the audited information is stated in accordance with SEC standards.
Audit standards require auditors to _______. conduct specific audit procedures to identify subsequent events that may occur up through the date of the auditor’s report conduct specific audit procedures to identify subsequent events that may occur after the date of the auditor’s report. apply optional use of analytical procedures to increase assurance levels related to subsequent events delegate auditing of subsequent events to the internal audit function A compilation engagement is _______. an audit of the financial statements, whereby an auditor expresses an opinion on the financial statements an audit of the system of internal control, whereby an auditor expresses an opinion on the system of internal control when an accounting firm assists management in the presentation of financial statements but does not audit, review, nor provide assurance as to whether the financial statements are presented fairly. when an audit firm assists management in the presentation of financial…
The following are two specific audit objectives in the audit of accounts payable. The list referred to is the list of accounts payable taken from the accounts payable subsidiary record. The total amount in the list agrees with the accounts payable balance in the general ledger. What is the emphasis of the auditor in the following audit procedures? Group of answer choices 1. All accounts payable included in the list represent amounts due to valid vendors. a. emphasis on possible overstatement b. emphasis on possible understatement 2. There are no unrecorded accounts payable. a. emphasis on possible overstatement b. emphasis on possible understatemen
The following are two specific audit objectives in the audit of accounts payable. The list referred to is the list of accounts payable taken from the accounts payable subsidiary record. The total amount in the list agrees with the accounts payable balance in the general ledger. Which of these two audit objectives validates the management assertion of existence, and which one applies to completeness? Group of answer choices 1. All accounts payable included in the list represent amounts due to valid vendors. a. existence b. occurrence 2. There are no unrecorded accounts payable. a. existence b. occurrence
Which of the following is correct about ISA 520? O a. ISA 520 deals with the procedures after an audit to help in forming an overall conclusion on the financial statements O b. ISA 520 deals with the engagement of an audit team members O c. ISA 520 deals with the procedures after an audit to help in forming an overall audit strategy O d. ISA 520 deals with the procedures in the beginning of an audit to help in forming an overall conclusion on the financial statements
Which two of the following statements regarding the use of analytical procedures of the audit are correct? i. Analytical procedures are used to test the effectiveness of the design of policies. ii. Analytical procedures involves inquiries and observation of routines to obtain evidences. iii. Analytical procedures help to identify unusual fluctuations for investigation. iv. Analytical procedures can assist the auditor in planning other audit procedures. a. iii and iv b. i and ii c. ii and iv d. ii and iii
The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelated