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: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 51FF
a.
To determine
Introduction:Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
To explain:Whether or not the members’ description is sufficient to assess their qualification. Also, explain whether or not the number of meetings is sufficient to fulfill their responsibilities. Also, explain the additional information that might be required and the manner to obtain that information.
b.
To determine
Introduction: Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
The audit committee financial expert and whether the individual will truly be able to fulfill the assigned role. Also, state the reason that audit committee member shall have financial expertise.
c.
To determine
Introduction:Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
To explain:Whether or not the compensation received by the members were adequate.
d.
To determine
Introduction:Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
To explain:The weaknesses in the audit committee governance structure.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
In the Why It Matters feature “Examples of Theft and FinancialReporting Frauds” at the beginning of the chapter, we introduced youto the Koss Corporation fraud. In this problem, we provide you withfurther details about that fraud. During the fall of 2009, Koss Corporation,a Wisconsin-based manufacturer of stereo headphone equipment,revealed that its vice president of finance (Sujata “Sue” Sachdeva) haddefrauded the company of approximately $31 million over a periodof at least five years. Grant Thornton LLP was the company’s auditor,and the firm issued unqualified audit opinions for the entire period in which they worked for Koss. According to reports, Sachdeva’s theftaccelerated over a period of years as follows:FY 2005 $2,195,477FY 2006 $2,227,669FY 2007 $3,160,310FY 2008 $5,040,968FY 2009 $8,485,937Q1 FY 2010 $5,326,305Q2 FY 2010 $4,917,005To give you a sense of the magnitude of the fraud, annual revenuesfor Koss Corporation are in the range of $40 to $45 million…
Use the three-step approach to analyse the following ethics-related issues using APES 110 and Corporations Act 2001.
An audit senior, John Smith, is in the engagement team of ABC Bank, and he also has a mortgage account with the bank worth $500,000. John is paying an interest of 2.2% to the bank. The current market prevailing interest rate is between 1.9% and 2.3%.
42-Mr. X is an auditor of XYZ Company. During the course of audit, he found that Mr. Y who was one of the executive directors of the company raised OMR 15,000 from the debenture holder which was beyond his authority. On confirming, he replied by e-mail that it was later approved by board. Can the e-mail received from executive director be considered as valid audit document?
O a. Unable to decide as the information is not sufficient
O b. No, it cannot be considered as valid audit document
O c. Only the evidence received in hard form is valid
o d. Yes, it can be considered as valid audit document
Chapter 2 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 2 - The Great Salad Oil Swindle of 1963 is an asset...Ch. 2 - Prob. 2TFQCh. 2 - The three elements of the fraud triangle include...Ch. 2 - Prob. 4TFQCh. 2 - Prob. 5TFQCh. 2 - Prob. 6TFQCh. 2 - Prob. 7TFQCh. 2 - Prob. 8TFQCh. 2 - Prob. 9TFQCh. 2 - Prob. 10TFQ
Ch. 2 - Prob. 11TFQCh. 2 - Prob. 12TFQCh. 2 - Prob. 13MCQCh. 2 - Prob. 14MCQCh. 2 - Prob. 15MCQCh. 2 - Prob. 16MCQCh. 2 - Prob. 17MCQCh. 2 - Prob. 18MCQCh. 2 - Prob. 19MCQCh. 2 - Prob. 20MCQCh. 2 - Prob. 21MCQCh. 2 - Prob. 22MCQCh. 2 - Prob. 23MCQCh. 2 - Prob. 24MCQCh. 2 - Prob. 25RSCQCh. 2 - Prob. 26RSCQCh. 2 - Prob. 27RSCQCh. 2 - Refer to Exhibit 2.1 a. What is a Ponzi scheme? b....Ch. 2 - Prob. 29RSCQCh. 2 - Prob. 30RSCQCh. 2 - Prob. 31RSCQCh. 2 - Prob. 32RSCQCh. 2 - Prob. 33RSCQCh. 2 - Prob. 34RSCQCh. 2 - Prob. 35RSCQCh. 2 - Prob. 36RSCQCh. 2 - Prob. 37RSCQCh. 2 - Prob. 38RSCQCh. 2 - Many consider the Enron fraud to be one of the...Ch. 2 - Prob. 40RSCQCh. 2 - Prob. 41RSCQCh. 2 - Refer to Exhibit 2.5 and answer the following...Ch. 2 - Prob. 43RSCQCh. 2 - Prob. 44RSCQCh. 2 - Prob. 45RSCQCh. 2 - Prob. 46RSCQCh. 2 - Prob. 47RSCQCh. 2 - Prob. 48RSCQCh. 2 - Prob. 49RSCQCh. 2 - Prob. 50FFCh. 2 - Prob. 51FFCh. 2 - Prob. 52FF
Knowledge Booster
Similar questions
- An accountant is hired by a company to do an audit on their financial statements. The accountant does everything she is asked. 16 days after the audit, the CFO is arrested for embezzlement. The stockholders sue the accountant, suggesting that she should have discovered the embezzlement during the audit. Should the court find that the accountant is negligent? Group of answer choices A. Yes, because an accountant is hired to determine if there is embezzlement B. Yes, but only if it is shown than an ordinary accountant would have also uncovered the embezzlement C. No, because the accountant was hired by the CFO, so therefore it would have been a conflict of interest D. Yes, because the accountant was hired by the CFO, therefore it is likely the accountant is also guiltyarrow_forwardWhich of the following is not part of Sarbanes–Oxley?a. An increased duty on the part of auditors to identify financial statement fraud.b. A requirement that the CEO and CFO certify the financial statements.c. Increased penalties for destruction of records in federal investigations.d. Increased penalties for mail fraud and criminal violations of the Securities Exchange Actof 1934arrow_forwardPls explain first how you solve it. Thank you. F COMPANY, organized on March 1, 2021, has a very poor internal control system. Thecompany's cashier is also its accountant. After 9 months of operations, the company's managersuspects that the cashier-accountant has been misappropriating company collections. You havebeen engaged to audit the company's accounts to determine the extent of fraud, if any. You started the audit on November 15. On that date, the cash on hand per your surprise countwas P5,140. Also on that date, the bank confirmed that the balance of the company's currentaccount was P26,328. Your examination of the records reveals that a check for P1,852 wasoutstanding on November 15. The company's markup is 40% of sales. Further examination of the company's records reveals the following balances at November 15,2021:arrow_forward
- Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an embezzlement of company funds?arrow_forwardYou are an audit supervisor assigned to a new client which is listed on a Stock Exchange. You visited the corporate headquarters to become acquainted with key personnel and to conduct a preliminary review of the company’s accounting policies, controls, and systems. During this visit, (b) You recognized the treasurer who was convicted of fraud several years ago. Identify the problems and explain them in relation to the internal environment.arrow_forwardJ, B & J, Certified Public Accountants, has audited the Highcredit Corporation for the past five years. Recently, the Securities and Exchange Commission (SEC) has commenced an investigation of Highcredit for possible violations of Federal securities law. The SEC has subpoenaed all of J, B & J’s working papers pertinent to the audit of Highcredit. Highcredit insists that J, B & J not turn over the documents to the SEC. What action should J, B & J take? Why?arrow_forward
- Assume you are the lead forensic investigator for a potential fraud case at AJB, Inc. After searching public records and other Internet sources, you accumulate the following financial information for the suspected fraud perpetrator, Jaleesa P. Crimin. YEAR 1 YEAR 2 YEAR 3 Assets: Residence #1 $243,000 $243,000 $243,000 Residence #2 138,000 Stocks and bonds 15,000 30,000 57,000 Automobiles 27,000 52,500 52,500 Boat 34,500 34,500 CD 12,000 42,000 81,000 Cash 5,670 12,150 29,160 Liabilities: Mortgage balance #1 136,080 68,040 16,200 Mortgage balance #2 138,000 Auto loans 18,000 57,000 Boat loan 34,500 9,000 Income: Salary 78,750 82,650 Interest/other 8,730 17,790 Expenses: Mortgage payments 24,300 42,120 Auto loan payments 9,720 9,720 Boat…arrow_forwardWhich of the following statements is true of the Sarbanes−Oxley Act? A. All private and foreign companies must issue an internal control report evaluated by an outside auditor. B. Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients. C. Those who commit securities fraud must be sentenced to 10 years in prison. D. The Public Company Accounting Oversight Board oversees the work of auditors of public companies.arrow_forward# 18: In 2001, the Enron scandal rocked the world of accounting. What is the name of Enron's external auditor, who failed to detect rampant fraud at Enron and was indicted for obstruction of justice for shredding documents related to the audit? A. Coopers & Lybrand B. Grant Thornton C. Pricewaterhouse D. Arthur Andersen a och Bola Josi to ipval txoa silt at bumearrow_forward
- #24arrow_forwardChu newly joins Simon & Co, CPA as an audit junior and his senior told him that the obtaining of audit evidence is a very important part of the audit and therefore the evidence obtained must be reliable. a) Other than objectivity of evidence, give and explain the other 5 factors that can affect the reliability of audit evidence. b) Chu has identified the following audit evidence: i) Bank statements which showed the bank balances of the client at year end. ii) Inventory count sheets showing the amount of inventory counted by the client warehouse staff at year end. iii) Bank reconciliation prepared by the accounts clerk without any review. Demonstrate the reliability concept to Chu by suggesting a more reliable evidence for each of the evidence Chu identified. Explain clearly why each of your suggested evidence more reliable by referring to one factor in (a).(Each factor in (a) can only be used ONCE.)arrow_forward§301 of SOX requires corporate audit committees to: O take vacations annually. O have a majority of members who are CPAs. set up hotlines so employees can leave tips about fraud. Ohave a code of ethics.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:9781305224414
Author:JENNINGS
Publisher:Cengage
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning