Loose-leaf For Auditing & Assurance Services: A Systematic Approach
11th Edition
ISBN: 9781260687637
Author: William F Messier Jr, Steven M Glover Associate Professor, Douglas F Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Chapter 10, Problem 10.3RQ
To determine
Concept Introduction:
To Discuss: the type of audit procedure used by auditor to test the possibility
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Besides the fraud triangle, auditors are required to consider two conditions which might lead to fraud. They are:
a. Inflated sales and bill-and-hold transactions.
b.Bill-and-hold transactions and embezzlement of cash.
c. Improper revenue recognition and stealing of inventory.
d. Management override of controls and improper revenue recognition.
Why do you think auditors were not able to detect the fraud in their previous audit?
Which of the following statements describes why a properly designed and executedaudit may not detect a material misstatement in the financial statements resultingfrom fraud?(1) Audit procedures that are effective for detecting unintentional misstatements maybe ineffective for an intentional misstatement that is concealed through collusion.(2) An audit is designed to provide reasonable assurance of detecting materialerrors, but there is no similar responsibility concerning fraud.(3) The factors considered in assessing control risk indicated an increased risk ofintentional misstatements, but only a low risk of unintentional misstatements.(4) The auditor did not consider factors influencing audit risk for account balancesthat have effects pervasive to the financial statements taken as a whole
Chapter 10 Solutions
Loose-leaf For Auditing & Assurance Services: A Systematic Approach
Ch. 10 - Prob. 10.1RQCh. 10 - Prob. 10.2RQCh. 10 - Prob. 10.3RQCh. 10 - Prob. 10.4RQCh. 10 - Prob. 10.5RQCh. 10 - Prob. 10.6RQCh. 10 - Prob. 10.7RQCh. 10 - Prob. 10.8RQCh. 10 - Prob. 10.9RQCh. 10 - Prob. 10.10RQ
Ch. 10 - Prob. 10.11RQCh. 10 - Prob. 10.12MCQCh. 10 - Prob. 10.13MCQCh. 10 - Prob. 10.14MCQCh. 10 - Prob. 10.15MCQCh. 10 - Prob. 10.16MCQCh. 10 - Prob. 10.17MCQCh. 10 - Prob. 10.18MCQCh. 10 - Prob. 10.19MCQCh. 10 - Prob. 10.20MCQCh. 10 - Prob. 10.21MCQCh. 10 - Prob. 10.22MCQCh. 10 - Prob. 10.23MCQCh. 10 - Prob. 10.24PCh. 10 - Prob. 10.25PCh. 10 - Prob. 10.26PCh. 10 - Prob. 10.27PCh. 10 - Prob. 10.28PCh. 10 - Prob. 10.29PCh. 10 - Prob. 10.30P
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- ased on an assessment of audit risk, the auditors are concerned with the following two risks: The risk that that the client might be making duplicate payments to vendors. The risk that the client’s accounting clerk might be making unauthorized payments to himself. Required: a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments. b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments. b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.arrow_forwardBased on an assessment of audit risk, the auditors are concerned with the following two risks: The risk that that the client might be making duplicate payments to vendors. The risk that the client’s accounting clerk might be making unauthorized payments to himself. Required: a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments. b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments. c. Describe the advantages of using data analytics software to identify unusual transactions or entries.arrow_forwardWhich of the following statements is FALSE?A. Irregularities are intentional misrepresentations associated with the commission of a fraudB. Errors are unintentional mistakesC. Data conversion provides safe storage for the off-line data files. These files could be backups or current data files.D. Before the auditor can determine the nature and extent of the tests to perform he or she must gain a thorough understanding of the client’s businessarrow_forward
- How does “fraud examination”differ from “forensic accounting”?arrow_forwardWith respect to fraudulent financial reporting, which one of the following statements is not correct? a.The risk that the auditor will not detect misstatement due to management fraud is greater than those due to employee fraud. b.It is difficult for the auditor to determine if misstatements in accounting estimates are caused by fraud or error. c.When the audit is properly planned and performed in accordance with ISAs, material misstatements are guaranteed to be detected by the auditor. d.Excessive pressure on management to meet expectations of third parties creates incentives forarrow_forwardIn a financial statement audit, inherent risk represents a. The risk that misstatements could occur and not be detected by the auditor's procedures. b. The risk that misstatements could occur and not be prevented or detected by the system of internal control. c. The risk that the auditor fails to modify materially misstated financial statements. d. The susceptibility of an account balance to misstatement that could be material.arrow_forward
- In which of the following circumstances would an auditor expect to find that an entity had implemented automated controls to reduce risks of misstatement?a. When errors are difficult to predict.b. When misstatements are difficult to define.c. When large, unusual, or nonrecurring transactions require judgment.d. When transactions are high volume and recurring.arrow_forwardWhat is the ethical value of applying the Fraud Triangle to assess the risk of material misstatements in the financial statements?arrow_forwardThe FBI employs deception to collect information during its investigations. Do you believe it is appropriate for auditors to use deception when collecting audit evidence? Explain.arrow_forward
- 1. Although the primary objective of an independent audit is not the discovery of fraud, the auditors in their work on cash take into consideration the high relative associated with this asset. One evidence of this attitude is evidenced by the CPAs alertness on signs of lapping. Define lapping and explain the audit procedures that CPAs might utilize to uncover lapping. 2. What actions should be taken by auditors when the count of cash on hand discloses shortage?arrow_forwardWhat is the auditor's responsibility for detecting theft or fraud?arrow_forwardwhich of the following regarding errors is correct Select one: a. it is easier for the auditor to detect because it is not intentional b. misappropriation of assets is an kind of errors c. it is more difficult for the auditor to detect because it is not intentional d. intentional misstatement of the financial statements,arrow_forward
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