Accounting Information Systems
10th Edition
ISBN: 9781337619202
Author: Hall, James A.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 4P
To determine
Explain potential risks to Company POEC and determine the course of action taken by the external auditor.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
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.
Tests of Controls: General Controls. The audit team of Packer Company identified thefollowing general controls in obtaining its overall understanding of Packer’s internal controlover the automated processing of transactions:1. Packer has routine maintenance on its computer equipment and related technology scheduled and performed every six months.2. Packer has formal, written systems development and documentation standards for theimplementation of new programs.3. Prior to implementing modifications to its existing programs, Packer tests and validatesthe program changes to ensure accurate processing.4. Packer has appropriately separated the responsibilities of systems analysts, programmers,and computer operators.5. Packer’s computer files are protected from loss through frequent backups and storage atan off-site location.6. Access to computer files and programs is protected through the use of passwords.7. On a monthly basis, Packer reviews any revisions in the access rights of its…
You are an auditor working with JUMAN audit firm. JUMAN audit firm accepted two engagements to audit the financial statements of MUNER company and MUHEET company. Explain how risk of material misstatement should he assessed and what effect that assessment will have on detection risk for the following audit clients:
MUHEET Corporationis one of several companies engaged in the manufacture of high- speed, high- capacity data storage devices. The industry is very competitive and subject to quick changes in technology. MUHEET’s operating results would place the company in the second quartile in terms of profitability and financial position. The company has never been the leader in the industry, with its products typically slightly behind the industry leaders in terms of performance.
Chapter 16 Solutions
Accounting Information Systems
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - What is the importance of the SPL?Ch. 16 - Prob. 9RQCh. 16 - Prob. 10RQ
Ch. 16 - Prob. 11RQCh. 16 - Prob. 12RQCh. 16 - What tests may be conducted for identifying...Ch. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - Prob. 16RQCh. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Prob. 19RQCh. 16 - Prob. 20RQCh. 16 - Prob. 1DQCh. 16 - Prob. 2DQCh. 16 - Prob. 3DQCh. 16 - What are rounding error routines, and why are they...Ch. 16 - Prob. 5DQCh. 16 - Prob. 6DQCh. 16 - Prob. 7DQCh. 16 - Prob. 8DQCh. 16 - The systems development life cycle is a...Ch. 16 - Prob. 10DQCh. 16 - Prob. 11DQCh. 16 - Compare and contrast the following techniques...Ch. 16 - Prob. 13DQCh. 16 - Prob. 1MCQCh. 16 - Prob. 2MCQCh. 16 - Which of the following is NOT an SDLC controllable...Ch. 16 - Prob. 4MCQCh. 16 - Which of the following statements is NOT correct?...Ch. 16 - Prob. 6MCQCh. 16 - Prob. 7MCQCh. 16 - Prob. 8MCQCh. 16 - Prob. 9MCQCh. 16 - Prob. 10MCQCh. 16 - Prob. 1PCh. 16 - Prob. 2PCh. 16 - Prob. 3PCh. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Prob. 6PCh. 16 - Prob. 7PCh. 16 - Prob. 8PCh. 16 - Prob. 9PCh. 16 - The Balcar Companys external auditors are...Ch. 16 - Prob. 11PCh. 16 - Prob. 12PCh. 16 - Prob. 13PCh. 16 - Prob. 14PCh. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - Prob. 17PCh. 16 - Prob. 18P
Knowledge Booster
Similar questions
- A division of your company purchased a large quantity of new desktop computers during the current fiscal year. An internal audit manager has asked you to audit the process used to acquire the computers. He also wants you to determine whether the computers have been used properly and accounted for correctly. The manager specified a set of audit objectives to guide your tests. For example, he wants you to determine whether: (1) The purchases of the computers were properly authorized. (2) Responsibilities regarding the computers were properly segregated. (3) The computers, as well as the software and information they contain, are properly safeguarded. Consider both physical and logical access。 (4) Laws and regulations regarding software usage have been complied with. (5) The computers recorded as being purchased actually exist. (6) All of the computers that were purchased have been recorded. (7) The amounts at which the computers are recorded are correct. (8) The estimated useful lives…arrow_forwardIT Controls: Systems Development, Program Changes, and Application Controlsarrow_forwardIn reviewing the processes, procedures, and internal controls of one of your audit clients, VeronicaCorporation, you notice the following practices in place. Veronica has recently installed a new electronicdata processing (EDP) system that affects the accounts receivable, billing, and shipping records. Thecompany identified a computer operator who is permanently assigned to each of the functions ofaccounts receivable, billing, and shipping. Each of these computer operators is given the responsibilityof running the program for transaction processing, making program changes, and reconciling thecomputer log. To prevent an operator from having exclusive access to the tapes and documentation,the computer operators randomly rotate the custody and control tasks every two (2) weeks over themagnetic tapes and the system documentation. Access controls to the computer room consist ofmagnetic cards and a digital code for each operator. Moreover, the system analyst and the computeroperation…arrow_forward
- Consider the following independent situations, all of which apply to audits of entities for the year ended 31 December 2019: In July 2019, Alpha Ltd started using a new general ledger software package. The Financial Controller is impressed with the new system, because management accounts are easily produced and allow detailed comparisons with budgets and prior-period figures across product lines and geographical areas. The conversion to the new system went smoothly. As it is a popular computer package, it required only minor As part of a computer systems conversion in Beta Ltd, the position of Systems Administrator was created. This position is responsible for all systems maintenance, including data backups and modifications. These tasks were previously the responsibility of the Gamma Ltd is a large supermarket chain with outlets in all major cities in the country. In August 2019 Gamma Ltd contracted out its payroll data processing in each city to an independent computer…arrow_forwardThe internal auditors of Brown Electrical Company report to the controller. Because of changes made in the past year to several of the transaction processing programs, the internal auditors created a new test data set. The external auditors requested that the old data set also be run. The internal auditors, embarrassed, explained that they overwrote the original test data set. Required: Outline any potential risks, and determine the courses of action the external auditor should take.arrow_forwardStar audit firm have started the annual audit of Carrefour Muscat. The auditors have a long meeting with their management. Their target is to conduct the audit during one week. The auditors have started their work. identify which of the following is related to their audit process. O a. Discussing corrective action plan O b. Identifying the risk Oc Conduct interviews O d. Create audit procedure and planarrow_forward
- An IT auditor is performing a test of the company's user access administration process, and has selected a random sample of 25 user access requests to evaluate. The IT audit test procedures revealed that 1 of the 25 sampled user access requests has not been properly authorized according to company policy. As a key next step in the IT audit process, the IT auditor should (select the BEST response): a) Communicate this concern to the Chief Executive Officer as soon as possible. b) Communicate this concern to the Audit Committee as soon as possible. c) Disregard the finding entirely. d) Perform additional audit procedures to better understand the risks related to the issue, as well as the root cause of the problem.arrow_forwardIn what way can audit procedures be modified to address assessed fraud risks?a. Obtain more reliable information.b. Perform procedures close to year-end.c. Apply computer-assisted techniques to all items.d. All of these are valid modifications.arrow_forwardAs the manager of the external audit team, you realize that the embedded audit module only writes material invoices to the audit file for the accounts receivable confirmation process. You are immediately concerned that the accounts receivable account may be substantially overstated this year and for the prior years in which this EAM was used.RequiredExplain why you are concerned because all ‘‘material’’ invoices are candidates for confirmation by the customer. Outline a plan for determining if the accounts receivable are overstated.arrow_forward
- Auditing ERP Databases You are an independent auditor attending an engagement interview with the client. The client organization has recently implemented a data warehouse. The management is concerned that the audit tests that you perform will disrupt operations. They suggest that instead of running tests against the live operational database, you draw the data for your analytical reviews and substantive tests of details from the data warehouse. They point out that operational data is copied weekly into the warehouse and everything you need will be contained there. This will enable you to perform your tests without disrupting routine operations. You agree to give this some thought and gat back to the client with your answer. Required: Draft a memo to the client outlining your response to their proposal. Mention any concerns that you might have.arrow_forwardAuditor ABC audits Company XYZ's financial statements and its internal control over financial reporting. Auditor ABC uses attribute sampling to evaluate Company XYZ's warehouse physical controls. Specifically, Auditor ABC checks whether the warehouse security cameras are working properly. The auditor decides the tolerable error rate to be 5%, and sampling risk is 5%. In the past five years, the failure rate of XYZ's security camera is 0.00%. 1. Based on the information above, what is the confidence level, and what is the minimum number of items to pick from the population? (6 pts) 2. If the auditor decides to decrease the sampling risk from 5% to 1%, how will sample size change? Please answer A. Increase, B. Decrease, or C. No Change. (4 pts) Tolerable Error Rate Tolerable Error Rate Expected Error Rate 5% 6% 7% 0.00% 59 49 42 0.25% 93 78 66 13 Expected Error Rate 5% 6% 7% 0.00% 45 38 32 0.25% 77 64 55 0.50% 93 78 66 0.50% 77 64 55 0.75% 93 78 66 0.75% 77 64 55 55 1.00% 93 78 66 1.00%…arrow_forwardDuring the most recent year's audit of Hoover Enterprises, senior management has advised the auditors that a new and more effective system of internal control has been designed and implemented by external consultants and the internal audit function. As a result of this information, what approach might the auditing firm take with respect to internal control? O The external auditors will be required to obtain written assurances from senior management, documenting the effectiveness of the new system of internal control, for inclusion in the audit file. O The auditor is likely to proceed with testing of the new controls, and if the new system is determined to be robust and effective, the auditor will issue a qualified opinion on internal control. O The auditor may presume that their previous understanding of internal control is no longer valid, and will likely amend audit procedures to document the effectiveness of the new system. O The external auditors will focus the audit time and…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning