Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

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Answer 1

Question

Chapter 5, Problem 1DQ

To determine

Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

Expert Solution & Answer

Explanation of Solution

Risk assessment refers to the estimation of the possibility of the adverse conditions. It may be considered as the analysis of “What is the worst that can happen”. The risk assessment must be carried on based on the ethical tone of the top management, misstatements, frauds and errors. The major objective of risk assessment is to scrutinize the weakest links in the financial reporting controls.

The importance of risk assessment includes the strengthening of the internal control, which reduces the opportunity for fraud. Risk assessment identifies the internal control deficiencies and the sensitive areas of the audit.

The risk assessment enables the auditor to find the material misstatements. This enables the auditor to perform the audit in a more efficient and effective manner.

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Bergo Bay's accounting system generated the following account balances on December 31. The company's manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory and the accrued factory payroll (Factory Wages Payable) has not been recorded. Debit Credit Notes payable Cash Accounts receivable Raw materials inventory Work in process inventory Finished goods inventory Prepaid rent Accounts payable Common stock Retained earnings (prior year) Sales Cost of goods sold $ 75,000 44,000 27,000 0 12,000 4,000 $ 9,800 12,800 40,000 76,000 221,400 Factory overhead General and administrative expenses Totals 118,000 27,000 53,000 $ 360,000 $ 360,000 These six documents must be processed to bring the accounting records up to date. Materials requisition 10: Materials requisition 11: Materials requisition 12: Labor time ticket 52: Labor time ticket 53: $ 4,500 direct materials to Job 402 $ 7,000 direct materials to Job 404 $ 2,100…

Answer 2

Question

Chapter 5, Problem 1DQ

To determine

Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

Expert Solution & Answer

Explanation of Solution

Risk assessment refers to the estimation of the possibility of the adverse conditions. It may be considered as the analysis of “What is the worst that can happen”. The risk assessment must be carried on based on the ethical tone of the top management, misstatements, frauds and errors. The major objective of risk assessment is to scrutinize the weakest links in the financial reporting controls.

The importance of risk assessment includes the strengthening of the internal control, which reduces the opportunity for fraud. Risk assessment identifies the internal control deficiencies and the sensitive areas of the audit.

The risk assessment enables the auditor to find the material misstatements. This enables the auditor to perform the audit in a more efficient and effective manner.

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Answer 3

Question

Chapter 5, Problem 1DQ

To determine

Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

Expert Solution & Answer

Explanation of Solution

Risk assessment refers to the estimation of the possibility of the adverse conditions. It may be considered as the analysis of “What is the worst that can happen”. The risk assessment must be carried on based on the ethical tone of the top management, misstatements, frauds and errors. The major objective of risk assessment is to scrutinize the weakest links in the financial reporting controls.

The importance of risk assessment includes the strengthening of the internal control, which reduces the opportunity for fraud. Risk assessment identifies the internal control deficiencies and the sensitive areas of the audit.

The risk assessment enables the auditor to find the material misstatements. This enables the auditor to perform the audit in a more efficient and effective manner.

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Answer 4

Question

Chapter 5, Problem 1DQ

To determine

Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

Expert Solution & Answer

Explanation of Solution

Risk assessment refers to the estimation of the possibility of the adverse conditions. It may be considered as the analysis of “What is the worst that can happen”. The risk assessment must be carried on based on the ethical tone of the top management, misstatements, frauds and errors. The major objective of risk assessment is to scrutinize the weakest links in the financial reporting controls.

The importance of risk assessment includes the strengthening of the internal control, which reduces the opportunity for fraud. Risk assessment identifies the internal control deficiencies and the sensitive areas of the audit.

The risk assessment enables the auditor to find the material misstatements. This enables the auditor to perform the audit in a more efficient and effective manner.

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Answer 5

Chapter 5, Problem 1DQ

To determine

Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

Expert Solution & Answer

Explanation of Solution

Risk assessment refers to the estimation of the possibility of the adverse conditions. It may be considered as the analysis of “What is the worst that can happen”. The risk assessment must be carried on based on the ethical tone of the top management, misstatements, frauds and errors. The major objective of risk assessment is to scrutinize the weakest links in the financial reporting controls.

The importance of risk assessment includes the strengthening of the internal control, which reduces the opportunity for fraud. Risk assessment identifies the internal control deficiencies and the sensitive areas of the audit.

The risk assessment enables the auditor to find the material misstatements. This enables the auditor to perform the audit in a more efficient and effective manner.

Answer 6

Chapter 5, Problem 1DQ

To determine

Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

Expert Solution & Answer

Explanation of Solution

Risk assessment refers to the estimation of the possibility of the adverse conditions. It may be considered as the analysis of “What is the worst that can happen”. The risk assessment must be carried on based on the ethical tone of the top management, misstatements, frauds and errors. The major objective of risk assessment is to scrutinize the weakest links in the financial reporting controls.

The importance of risk assessment includes the strengthening of the internal control, which reduces the opportunity for fraud. Risk assessment identifies the internal control deficiencies and the sensitive areas of the audit.

The risk assessment enables the auditor to find the material misstatements. This enables the auditor to perform the audit in a more efficient and effective manner.

Answer 7

Chapter 5, Problem 1DQ

To determine

Identify the objectives of audit risk assessment; its importance in assessing the occurrence of fraud; and the influence of the assessment on evaluation of ICFR.

Answer 8

Expert Solution & Answer

Explanation of Solution

Risk assessment refers to the estimation of the possibility of the adverse conditions. It may be considered as the analysis of “What is the worst that can happen”. The risk assessment must be carried on based on the ethical tone of the top management, misstatements, frauds and errors. The major objective of risk assessment is to scrutinize the weakest links in the financial reporting controls.

The importance of risk assessment includes the strengthening of the internal control, which reduces the opportunity for fraud. Risk assessment identifies the internal control deficiencies and the sensitive areas of the audit.

The risk assessment enables the auditor to find the material misstatements. This enables the auditor to perform the audit in a more efficient and effective manner.