Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
10th Edition
ISBN: 9780077732509
Author: William F Messier Jr, Steven M. Glover Associate Professor, Douglas F. Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Chapter 3, Problem 3.17MCQ
To determine
Concept Introduction:
In the preliminary engage activities phase of the audit, the auditor gains the knowledge of the client and its business. At the end of this phase, the auditor sends an engagement letter to the client. This letter is sent to confirm the engagement and terms in order to avoid future conflicts between the auditor and the client.
To choose: The correct type of document for the given description.
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When planning the audit, the auditor should make inquiries of management in order to do the following, except
Group of answer choices
Determine whether management and other within the entity (e.g., internal audit function) have knowledge of any actual, suspected or alleged fraud affecting the entity.
Provide useful information concerning the risks of material misstatements in the financial statements resulting from management fraud.
Obtain an understanding of the accounting and internal control systems management has put in place to address fraud and error.
Obtain an understanding of management’s assessment of the risk that the financial statements may be materially misstated as a result of fraud.
Fraud and error present risks to an entity. Both internal and external auditors are required to dealwith risks to the entity. However, the responsibilities of internal and external auditors in relationto the risk of fraud and error differ.Required:(a) Explain the responsibilities of the Internal Audit function in respect of the risk of fraudand error
When obtaining an understanding of the entity and its environment, including its internal control, the auditor may identify events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Such events or conditions are referred to as
Group of answer choices
Fraud environment.
Fraud risk factors.
Fraudulent activities.
Fraud conditions
Chapter 3 Solutions
Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
Ch. 3 - Prob. 3.1RQCh. 3 - Prob. 3.2RQCh. 3 - Prob. 3.3RQCh. 3 - Prob. 3.4RQCh. 3 - Prob. 3.5RQCh. 3 - Prob. 3.6RQCh. 3 - Prob. 3.7RQCh. 3 - Prob. 3.8RQCh. 3 - Prob. 3.9RQCh. 3 - Prob. 3.10RQ
Ch. 3 - Prob. 3.11RQCh. 3 - Prob. 3.12RQCh. 3 - Prob. 3.13RQCh. 3 - Prob. 3.14RQCh. 3 - Prob. 3.15RQCh. 3 - Prob. 3.16MCQCh. 3 - Prob. 3.17MCQCh. 3 - Prob. 3.18MCQCh. 3 - Prob. 3.19MCQCh. 3 - Prob. 3.20MCQCh. 3 - Prob. 3.21MCQCh. 3 - Prob. 3.22MCQCh. 3 - Prob. 3.23MCQCh. 3 - Prob. 3.24MCQCh. 3 - Prob. 3.25MCQCh. 3 - Prob. 3.26PCh. 3 - Prob. 3.27PCh. 3 - Prob. 3.28PCh. 3 - Prob. 3.29PCh. 3 - Prob. 3.30PCh. 3 - Prob. 3.31PCh. 3 - Prob. 3.32P
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- Professional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements. a. Identify the activities that affect the revenue cycle. b. Identify the financial statement accounts typically associated with the revenue cycle.arrow_forwardWhich of the following statements is correct with regards to the auditor's responsibility concerning fraud? a.Fraud detection is the objective of an audit. b.It is the auditor's responsibility to prevent fraud. c.The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material statement, whether caused by fraud or error. d.When fraud is discovered by the auditor they must withdraw from the engagement.arrow_forwarda) Auditors (Internal & External) are required to deal with fraud and error which represents risks to an entity. Their responsibilities however differ in relation to fraud and risks Required: (i) Explain what role the internal audit function plays in relation to risks of fraud and error in an entity. (ii) Whataretheresponsibilitiesofanexternalauditorinrelationtotheriskoffraud and error during the audit of financial statements?arrow_forward
- Distinguish between an auditor’s responsibilities to detect and report errors, illegal acts, and fraud. What role does materiality have in determining the proper reporting and disclosure of such events?arrow_forwardExplain auditors’ responsibility for fraud risk assessment and define and explain the differences among several types of fraud and errors that might occur in an organization.arrow_forwardThe major reason an independent auditor gathers audit evidence is to(1) form an opinion on the financial statements. (3) evaluate management.(2) detect fraud. (4) assess control risk.arrow_forward
- The most important objective of risk assessment procedures performed by auditor is a. To identify and assess financial risk in the activities of the entity b. To identify and assess the risk in achieving the entity objectives c. To detect material misstatements in the financial statements d. To detect errors and fraud occurred in the books of accountsarrow_forwardAnswer in detailarrow_forward8. The essence of the audit function is to: Select one:a. Examine individual transactions so that the auditor may certify as to their validityb. Detect fraudc. Determine whether the client’s financial statements are fairly stated.d. Assure the consistent application of correct accounting procedures.arrow_forward
- 2. An auditor is required to obtain sufficient understanding of each component of an entity’s internal control system to plan the audit of the entity’s financial statements and to assess control risk for the associated assertions in the account balance, transaction class, and disclosure components of the financial statements. a. Define Internal Control b. For what purpose should an auditor’s understanding of the internal control components be used in planning an audit? c. What are an auditor’s documentation requirements concerning an entity’s internal control system and the assessed level of control riskarrow_forwardThe auditor’s primary consideration is whether, and how, internal control prevents, or detects and corrects: Material misstatement of the entity’s financial statements Financial statement fraud Incentives that prompt an employee to behave improperly illegal actions of the Managementarrow_forwardAccounting Which of the following statements is true regarding the identification and assessment of the risks of material misstatements by the auditor? a. As part of brainstorming activities, the auditor should identify possible frauds that could occur. Auditing standards require the auditor to identify and assess the risks of material misstatement due to fraud at the assertion level. Auditing standards require the auditor to identify and assess the risks of material misstatement due to fraud at the financial statement level. d. All of these statements are true.arrow_forward
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