Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Question
Chapter 26, Problem 18.1MCQ
To determine
Identify the option that best describes the operational audit..
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Which of the following best describes the operational audit?
Select one:
a. It requires the constant review by internal auditors of the administrative controls as they relate to the operations of the company.
b. It concentrates on seeking aspects of operations in which waste could be reduced by the introduction of controls.
c. It attempts and is designed to verify the fair presentation of a company’s results of operations.
d. It concentrates on implementing financial and accounting control in a newly organized company.
Which of the following best describes the operational audit?(1) It requires constant review by internal auditors of the administrative controls asthey relate to the operations of the company.(2) It concentrates on implementing financial and accounting controls in a newlyorganized company.(3) It attempts and is designed to verify the fair presentation of a company’s resultsof operations.(4) It concentrates on seeking aspects of operations in which waste would be reducedby the introduction of controls
Why is there a need on the part of the client entity to monitor internal controls over time?
a. Because the auditor needs to obtain understanding of internal control
b. Because unmonitored controls tend to deteriorate over time
c. Because it will affect the timing of substantive audit procedures
d. Because it is a requirement of the applicable financial reporting framework
Chapter 26 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 26 - Prob. 1RQCh. 26 - Prob. 2RQCh. 26 - Prob. 3RQCh. 26 - Prob. 4RQCh. 26 - Prob. 5RQCh. 26 - Prob. 6RQCh. 26 - Prob. 7RQCh. 26 - Prob. 8RQCh. 26 - Prob. 9RQCh. 26 - Prob. 10RQ
Ch. 26 - Prob. 11RQCh. 26 - Prob. 12RQCh. 26 - Prob. 13RQCh. 26 - Prob. 14RQCh. 26 - Prob. 15RQCh. 26 - Prob. 16.1MCQCh. 26 - Prob. 16.2MCQCh. 26 - Prob. 16.3MCQCh. 26 - Prob. 17.1MCQCh. 26 - Prob. 17.2MCQCh. 26 - Prob. 17.3MCQCh. 26 - Prob. 18.1MCQCh. 26 - Prob. 18.2MCQCh. 26 - Prob. 18.3MCQCh. 26 - Prob. 19.1MCQCh. 26 - Prob. 19.2MCQCh. 26 - Prob. 19.3MCQCh. 26 - Prob. 20DQPCh. 26 - Prob. 21DQPCh. 26 - Prob. 22DQPCh. 26 - Prob. 23DQPCh. 26 - Prob. 24DQPCh. 26 - Prob. 25DQP
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- Which of the following is NOT a requirement in management’s report on the effectiveness of internal controls over financial reporting?a. A statement of management’s responsibility for establishing and maintaining adequate internal control user satisfaction. b. A statement that the organization’s internal auditors have issued an attestation report on management’s assessment of the company’s internal controls. c. A statement identifying the framework management uses to conduct its assessment of internal controls. d. An explicit written conclusion as to the effectiveness of internal control over financial reporting.arrow_forwardWhich of the following control objectives in the General Ledger activities under the Record-to-Report process is least likely to have more extensive audit procedures for a business in an industry with fewer regulations? a. To ensure that the general ledger and management accounts are accurate, reliable, and appropriately reflect the structure and operations of the organization. b. To ensure that the accounting information can be used to generate all the required statutory published accounting statements. c. To ensure that the accounting data is capable of meaningful and accurate analysis to support management decisions and actions. d. To ensure that the accounting records are maintained in accordance with the prevailing laws, regulations, and professional good practice. NEED ASAParrow_forwardWhich of the following activities should the internal audit function NOT be involved in?a. Monitoring of management's performanceb. Reviewing adequacy of management information for decision-making purposesc. Taking responsibility for the implementation of a new sales ledger systemd. Assessing compliance with regulation Internal auditors may not perform:a. Audits of financial statements resulting in reports intended for management’s use only.b. Integrated audits leading to an audit opinion issued in accordance with PCAOB standards.c. Forensic audits.d. All of the above. An “integrated audit”, as required by Sarbanes-Oxley Act for U.S. public companies,includes an audit ofa. The company’s internal controlsb. The company’s financial statementsc. The company’s compliance with its rules and policiesd. Both A and B The auditor’s opinions on the effectiveness of internal control over financial reporting (ICFR) in anintegrated audit in accordance with PCAOB AS include the following types…arrow_forward
- Prepare a broad audit plan:1. What material types of transactions and transaction cycles are involved?2. What are the high-risk areas?3. What are the low-risk areas?4. If management faced tremendous pressure regarding the entity’s financial performance, what opportunities might exist for them to engage in fraudulent financial reporting?5. To what extent do you believe it will be appropriate to reduce assessed control risk?6. How will audit effort be allocated among geographical areas?7. What form of auditors’ report do you expect will be issued; what does it mean?8. Indicate as an appendix to the report how the project team was organized and how it functioned on the project and submit appendix with Team Project.arrow_forwardRequired: When evaluating internal control design effectiveness during the internal control over financial reporting, the audit team must determine whether controls have been put in place for each relevant assertion about each significant account. For each relevant assertion, the audit team must determine the points in the process where a misstatement might occur and then determine if a control activity has been put in place to mitigate the risk of material misstatement for each relevant assertion. For each of the possible misstatements identified below, please select the appropriate financial statement assertion: Possible Misstatement/Risk a. Revenue is overstated because the controller created fraudulent invoices and recorded them. b. Revenue is understated because the accountant closed the sales cycle a week early to go on vacation. c. Accounts Receivable is overstated because the accounts receivable clerk forgot to apply available discounts. d. Accounts Receivable is overstated…arrow_forwardPlease respond promptly: When auditing a private company, the auditor should obtain an understanding of internal control sufficient to___________. Select one: a. Provide a method for safeguarding assets, checking the accuracy and reliability of accounting data, promoting operational efficiency, and encouraging adherence to prescribed managerial policies. b. Provide reasonable protection against client fraud and defalcations by client employees. c. Assess control risk. d. Provide a basis for suggestions to the client for improving the accounting system.arrow_forward
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