A
Introduction:The
To identify: Theprimary financial statement assertion relative to investments that would be addressed by each audit procedure.
B
Introduction:The audit procedures are the procedures used by the auditor in order to test the viability of the financial information provided by the company whose statements are being audited. Such procedures include inquiries, observation, calculations etc. All of this is done to check if the financial information is free from any kind of material misstatement or not.
To explain: Theadditional audit procedures that the auditor should consider.
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AUDITING+ASSURANCE SERVICES (LL)
- Pierce, an independent auditor, was engaged to examine the financial statements of Wong Construction, Inc., for the year ended December 31. Wong's financial statements reflect a substantial amount of mobile construction equipment used in the firm's operations. The equipment is accounted for in a subsidiary ledger. Pierce developed an understanding of internal control and set the control risk at moderate. Required: Identify the substantive audit procedures Pierce should utilize in examining mobile construction equipment and related depreciation in Wong's financial statements.arrow_forwardBank Oman is a publicly traded company. You were part of the team that was hired to conduct an audit of the financial statements of the company for the previous year. After detailed examination of controls and transactions, you discovered a few immaterial misstatements in their accounting practices which were immediately corrected by management. These misstatements include errors in the computation of depreciation and valuation of the inventory. In this situation, what type of audit report could your team possibly give to Bank Oman? a. Qualified opinion b. Adverse opinion c. Disclaimer of opinion d. Unqualified opinionarrow_forwardYou were assigned to audit the bond investments of JIHUZ company. The company maintains the records and custody of its certificates, thus you have decided to conduct a count of securities to test the existence assertion. You have asked that a person from JIHUZ company should accompany you during the count. Why is this important? To detect fraudulent securities So that the company representative may assist you during the count To acknowledge any variances during the inspection. -ry So that the inspection of securities will be conducted in an efficient mannerarrow_forward
- Moranda and Sills, LLP, has served for over 10 years as the auditor of the financialstatements of Highland Credit Union. The firm is conducting its audit planning for the currentfiscal year and is in the process of performing risk assessment procedures. Based on inquiries andother information obtained, the auditors learned that the credit union is finalizing an acquisitionof a smaller credit union located in another region of the province. Management anticipatesthat the transaction will close in the third quarter, and, while there will be some challenges inintegrating the IT systems of the acquired credit union with Highland systems, the bank shouldrealize a number of operational cost savings over the long term.During the past year, the credit union has expanded its online service options for customers, who can now remotely deposit funds into and withdraw funds from chequing and savingsaccounts. The system has been well received by customers and the credit union hopes to continue…arrow_forwardMark Williams, CPA, was engaged by Jackson Financial Development Company to audit the financial statements of Apex Construction Company, a small closely held corporation. Williams was told when he was engaged that Jackson Financial needed reliable financial statements that would be used to determine whether to purchase a substantial amount of Apex Construction’s convertible debentures at the price asked by the estate of one of Apex’s former directors. Williams performed his audit in a negligent manner. As a result of his negligence, he failed to discover substantial defalcations by Carl Brown, the Apex controller. Jackson Financial purchased the debentures, but it would not have done so if the defalcations had been discovered. After discovery of the fraud, Jackson Financial promptly sold them for the highest price offered in the market at a $70,000 loss. Will the negligence of Mark Williams, CPA, prevent him from recovering on a liability insurance policy covering the practice of…arrow_forwardMark Williams, CPA, was engaged by Jackson Financial Development Company to audit the financial statements of Apex Construction Company, a small closely held corporation. Williams was told when he was engaged that Jackson Financial needed reliable financial statements that would be used to determine whether to purchase a substantial amount of Apex Construction’s convertible debentures at the price asked by the estate of one of Apex’s former directors. Williams performed his audit in a negligent manner. As a result of his negligence, he failed to discover substantial defalcations by Carl Brown, the Apex controller. Jackson Financial purchased the debentures, but it would not have done so if the defalcations had been discovered. After discovery of the fraud, Jackson Financial promptly sold them for the highest price offered in the market at a $70,000 loss. If Apex Construction also sues Williams for negligence, what are the probable legal defenses Williams’s attorney would raise?…arrow_forward
- Mark Williams, CPA, was engaged by Jackson Financial Development Company to audit the financial statements of Apex Construction Company, a small closely held corporation. Williams was told when he was engaged that Jackson Financial needed reliable financial statements that would be used to determine whether to purchase a substantial amount of Apex Construction’s convertible debentures at the price asked by the estate of one of Apex’s former directors. Williams performed his audit in a negligent manner. As a result of his negligence, he failed to discover substantial defalcations by Carl Brown, the Apex controller. Jackson Financial purchased the debentures, but it would not have done so if the defalcations had been discovered. After discovery of the fraud, Jackson Financial promptly sold them for the highest price offered in the market at a $70,000 loss. What liability does Williams have to Jackson Financial? Explainarrow_forwardYou were assigned to audit the bond investments of ABCcompany. The company maintains the records and custody of its certificates, thus you have decided to conduct a count of securities to test the existence assertion. You have asked that a person from ABCcompany should accompany you during the count. Why is this important? Group of answer choices To detect fraudulent securities So that the company representative may assist you during the count To acknowledge any variances during the inspection. So that the inspection of securities will be conducted in an efficient manner.arrow_forwardA well-financed audit client of a CPA firm invests large amounts in marketable securities. As part of its internal control, the company uses a monthly report of securities transactions. the report is prepared by the controller and presented to the investment committee of the board of directors. What information should this report contain?arrow_forward
- Gordon & Moore, CPAs, were the auditors of Fox & Company, a brokerage firm. Gordon & Moore examined and reported on the financial statements of Fox, which were filed with the Securities and Exchange Commission. Several of Fox’s customers were swindled by a fraudulent scheme perpetrated by two key officers of the company. The facts establish that Gordon & Moore were negligent, but not reckless or grossly negligent, in the conduct of the audit, and neither participated in the fraudulent scheme nor knew of its existence. The customers are suing Gordon & Moore under the antifraud provisions of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 for aiding and abetting the fraudulent scheme of the officers. The customers’ suit for fraud is predicated exclusively on the negligence of the auditors in failing to conduct a proper audit, thereby failing to discover the fraudulent scheme. What is the probable outcome of the lawsuit? Explain. What other…arrow_forwardGordon & Moore, CPAS, were the auditors of Fox & Company, a brokerage firm. Gordon & Moore examined and reported on the financial statements of Fox, which were filed with the Securities and Exchange Commission. Several of Fox's customers were swindled by a fraudulent scheme perpetrated by two key officers of the company. The facts establish that Gordon & Moore were negligent, but not reckless or grossly negligent, in the conduct of the audit, and neither participated in the fraudulent scheme nor knew of Its existence. The customers are suing Gordon & Moore under the antifraud provisions of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 for alding and abetting the fraudulent scheme of the officers. The customers' sult for fraud is predicated exclusively on the negligence of the auditors in falling to conduct a proper audit, thereby failing to discover the fraudulent scheme. Required: Answer the following, setting forth reasons for any conclusions stated. a. What is…arrow_forwardFollowing are typical questions that might appear on an internal control questionnaire for investments in marketable securities. Is custody of investment securities maintained by an employee who does not maintain the detailed records of the securities? Are securities registered in the company name? Are investment activities reviewed by an investment committee of the board of directors? Assuming that the operating effectiveness of each of the above procedures is found to be inadequate, describe how the auditors might alter their substantive procedures to compensate for the increased level of control risk.arrow_forward
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