Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 5, Problem 18DQP
To determine
Explain whether the auditor’s behavior will be considered as “non-negligence, ordinary negligence, gross negligence, constructive fraud, fraud, or criminal behavior”, for each of the situations given
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After fieldwork audit procedures are completed, a partner of the CPA firm who has not been involved in the audit performs a second wrap-up review of the audit documentation. The second review usually focuses on:
A.Evaluation of the significant judgements made by the engagement team and the related conclusions reached in forming the overall conclusion.
B. Fraud involving the client's management and its employees
C. The materiality of the adjusting entries proposed by the audit staff
D. The communication of internal control weakness to those charged with governance
You were recently hired by the CPA firm Honson & Hansen. Before you start working, the firm requires that you participate in the
first-year staff training course. The instructor asks you to prepare answers for the following questions:
a. How is audit evidence defined?
b. How is the collection of audit evidence related to management assertions?
c. What are the two key characteristics of audit evidence that an auditor must consider when evaluating the quality of
the evidence? Describe the meaning of each of these characteristics in the context of auditing.
a) What are key audit matters? How do these affect the format of the audit report? b) Stewart Jones is reviewing the results of the subsequent events audit procedures. Stewart is writing a report for his audit partner based on these results and will be attending a meeting tomorrow with the partner and representatives of the company to discuss them. The issue will be whether the financial report should be amended, or additional notes included for these subsequent events.Many of the items are not material and Stewart will recommend that no action be taken with respect to these. However, there are several items that Stewart believes are material and should be discussed at the meeting. These are as follows.(i) The board is planning to issue shares in a private placement on 15 August. (ii) The share issue is to fund the purchase of a 60 per cent stake in another company. The negotiations are in the final stages and although the contract is not yet signed it will be signedby 15 August.(iii)…
Chapter 5 Solutions
Auditing And Assurance Services
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - Prob. 8RQCh. 5 - Prob. 9RQCh. 5 - Prob. 10RQ
Ch. 5 - What potential sanctions does the SEC have against...Ch. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14.1MCQCh. 5 - Prob. 14.2MCQCh. 5 - Prob. 14.3MCQCh. 5 - Prob. 15.1MCQCh. 5 - Prob. 15.2MCQCh. 5 - Prob. 15.3MCQCh. 5 - Prob. 16.1MCQCh. 5 - Prob. 16.2MCQCh. 5 - Prob. 16.3MCQCh. 5 - Prob. 17DQPCh. 5 - Prob. 18DQPCh. 5 - Prob. 19DQPCh. 5 - Prob. 20DQPCh. 5 - Prob. 21DQPCh. 5 - Prob. 22DQPCh. 5 - Prob. 23DQPCh. 5 - Prob. 24DQPCh. 5 - Prob. 27DQPCh. 5 - Prob. 28C
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Similar questions
- The auditor is required to prepare audit documentation sufficient to enable an experienced auditor, having no previous connection with the audit, to understand the _________________ in reaching conclusions on significant matters arising during the audit. Select one: a. Confirmation letters b. The interviews conducted with employees and management c. The total evidence gathered d. Significant professional judgements madearrow_forwardc) You are the partner responsible for quality control in Suta Excellence, A well-known audit firm. You are reviewing the findings from a recent post-issuance (cold) review performed by your firm’s compliance department. The following were identified on a number of audits: Zhetta CompanyA review of working papers found that some working papers had not been signed off by the team member that had completed the work. Some working papers were not dated, and some did not have a signature confirming they had not been reviewed. Petra CompanyA mandatory procedure included in the audit plan which required a written representation letter to be obtained, had not been completed. A comment had been added by the audit manager stating that there were no issues requiring a written representation from management. Jantra CompanyAn audit test over purchases required a sample of 60 invoices to be tested. 54 had been tested and found to be recorded accurately and completely. Six (6) invoices could not be…arrow_forwardWhat are key audit matters? How do these affect the format of the audit report? b) Stewart Jones is reviewing the results of the subsequent events audit procedures. Stewart iswriting a report for his audit partner based on these results and will be attending a meetingtomorrow with the partner and representatives of the company to discuss them. The issue will bewhether the financial report should be amended, or additional notes included for thesesubsequent events.Many of the items are not material and Stewart will recommend that no action be taken withrespect to these. However, there are several items that Stewart believes are material and shouldbe discussed at the meeting. These are as follows.(a) The board is planning to issue shares in a private placement on 15 August. (b) The share issue is to fund the purchase of a 60 per cent stake in another company. Thenegotiations are in the final stages and although the contract is not yet signed it will be signedby 15 August. (c) A writ was…arrow_forward
- You are the partner responsible for quality control in Suta Excellence, A well-known audit firm. You are reviewing the findings from a recent post-issuance (cold) review performed by your firm’s compliance department. The following were identified on a number of audits: 1. A review of working papers found that some working papers had not been signed off by the team member that had completed the work. Some working papers were not dated, and some did not have a signature confirming they had not been reviewed.2. A mandatory procedure included in the audit plan which required a written representation letter to be obtained, had not been completed. A comment had been added by the audit manager stating that there were no issues requiring a written representation from management.3. An audit test over purchases required a sample of 60 invoices to be tested. 54 had been tested and found to be recorded accurately and completely. Six (6) invoices could not be found. No further invoices were…arrow_forward1) You are the partner responsible for quality control in Suta Excellence, A well-known audit firm. You are reviewing the findings from a recent post-issuance (cold) review performed by your firm's compliance department. The following were identified on a number of audits: Zhetta Company. A review of working papers found that some working papers had not been signed off by the team member that had completed the work. Some working papers were not dated, and some did not have a signature confirming they had not been reviewed. Petra Company A mandatory procedure included in the audit plan which required a written representation letter to be obtained, had not been completed. A comment had been added by the audit manager stating that there were no issues requiring a written representation from management. Jantra Company. An audit test over purchases required a sample of 60 invoices to be tested. 54 had been tested and found to be recorded accurately and completely. Six (6) invoices could not…arrow_forwardA lead audit engagement partner has been providing audit service to the same non-PIE audit client for the last 10 years. What type of threat to independence might this create? Intimidation Self-review Familiarity Advocacyarrow_forward
- You are the partner responsible for quality control in Suta Excellence, A well-known audit firm. You are reviewing the findings from a recent post-issuance (cold) review performed by your firm’s compliance department. The following were identified on a number of audits: Zhetta Company Dr Cletus Agyenim Boateng, Dr Emmanuel T. Asare and Mr Augustine Addo A review of working papers found that some working papers had not been signed off by the team member that had completed the work. Some working papers were not dated, and some did not have a signature confirming they had not been reviewed. Petra Company A mandatory procedure included in the audit plan which required a written representation letter to be obtained, had not been completed. A comment had been added by the audit manager stating that there were no issues requiring a written representation from management. Jantra Company An audit test over purchases required a sample of 60 invoices to be tested. 54 had been tested and found to…arrow_forwardThe PCAOB issues audit practice alerts to highlight new, emerging, or otherwise noteworthy circumstances. Revenue is the largest account in the financial statements for many companies, and many fraudulent financial reporting cases have involved the intentional overstatement of revenue. For these reasons, the audit of revenue is often a significant focus of PCAOB inspections. PCAOB Audit Staff Practice Alert No. 12, Matters Related to Auditing Revenue in an Audit of Financial Statements, provides guidance to auditors and also highlights several deficiencies in the audit of revenue as identified through inspections. Download the practice alert at www.pcaobus.org to answer the following questions: What are the deficiencies identified by the PCAOB related to the use of substantive analytical procedures in testing revenue? What sources of information does the PCAOB recommend auditors use to develop plausible expectations of revenue when performing substantive analytical procedures? What…arrow_forwardAlthough the quantity, type, and content of audit documentation will vary with thecircumstances, audit documentation generally will include the(1) copies of those client records examined by the auditor during the course of theengagement.(2) evaluation of the efficiency and competence of the audit staff assistants by thepartner responsible for the audit.(3) auditor’s comments concerning the efficiency and competence of client management personnel.(4) auditing procedures followed and the testing performed in obtaining audit evidence.arrow_forward
- classify the information (1-10)according to the elements of an audit finding (criteria, condition, cause, effect, and recommendations):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_forwardThe external auditor of a company has certain requirements due to Sarbanes-Oxley. Which of the following best describes these requirements? A. The auditor is required to only report weaknesses in the internal control design of the company he or she is auditing. B. The auditor must issue an internal control report on the evaluation of internal controls overseen by the Public Company Accounting Oversight Board C. The auditor in charge can serve for a period of only two years. D. The Public Company Accounting Oversight Board reviews reports submitted by the auditors when no evaluations have been performed.arrow_forward
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