Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN: 9781337619455
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: Cengage Learning
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Question
Chapter 5, Problem 20RQSC
To determine
Concept Introduction:The objective of this analysis is to analyse the risks to financial reporting that is associated with the inadequacy of segregation of duties and that may lead the organization towards increased risks as they may have to undergo fraudulent activities.
Requirement 1
The risks to financial reporting that is associated with the inadequacy of segregation of duties.
b
To determine
Concept Introduction:The objective of this analysis is to analyse the risks to financial reporting caused by the other controls that might mitigate the segregation of dutiesand that may lead the organization towards increased risks as they may have to undergo fraudulent activities.
Requirement 2
To explain:Other controls that might mitigate the segregation of duties.
To determine
Concept Introduction:The objective of this analysis is to analyse the possible tests of controls for mitigating controls that may lead the organization towards minimized risks as they have set relevant controls to avoid fraudulent activities.
Requirement 3
Possible tests of controls for mitigating controls.
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Segregation of duties is an important internal control. However,this control is often a challenge for smaller businesses because they donot have sufficient staff. Normally, a segregation of duties deficiencyresults in either a significant deficiency or a material weakness in internalcontrol. For each segregation of duties deficiency identified as(1)–(6), complete the following three tasks:a. Indicate the risk to financial reporting that is associated with theinadequacy of the segregation of duties.b. Identify other controls that might mitigate the segregation ofduties risks.c. Identify possible tests of controls for the mitigating controlsselected in (b).The inadequate segregation of duty situations includes:1. The same individual handles cash receipts, the bank reconciliation,and customer complaints.2. The same person prepares billings to customers and also collectscash receipts and applies them to customer accounts.3. The person who prepares billings to customers does not handlecash…
Segregation of duties is an important concept in internal control. However, segregation of duties is often a challenge for smaller businesses because they do not have sufficient staff to segregate duties. Normally, the segregation of duties identified below results in either a significant deficiency or a material weakness in internal control.For each “segregation of duties: problem identified here:a. Identify the risk to financial reporting that is associated with the inadequacy of the segregation of duties.b. Identify other controls that might mitigate the segregation of duties risks.c. If a control is identified that would mitigate the risks, briefly indicate what evidence the auditor would need to gather to determine that the control is operating effectively.Situations1. The same individual handles cash receipts, the bank reconciliation, and customer complaints.2. The same person prepares billings to customers and also collects cash receipts and applies them to customer accounts.3.…
nternal control does not consist of policies and procedures that
Select one:
a. Ensure that business information is accurate
b. Protect assets from misuse
c. Guarantee the company will earn a profit
d. Ensure employees and managers comply with laws and regulations
Chapter 5 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
Ch. 5 - Prob. 1CYBKCh. 5 - Prob. 2CYBKCh. 5 - Prob. 3CYBKCh. 5 - Prob. 4CYBKCh. 5 - Prob. 5CYBKCh. 5 - Prob. 6CYBKCh. 5 - Prob. 7CYBKCh. 5 - Prob. 8CYBKCh. 5 - Prob. 9CYBKCh. 5 - Prob. 10CYBK
Ch. 5 - Prob. 11CYBKCh. 5 - Prob. 12CYBKCh. 5 - Prob. 13CYBKCh. 5 - Prob. 14CYBKCh. 5 - Prob. 15CYBKCh. 5 - Which of the following accounts would not be...Ch. 5 - Prob. 17CYBKCh. 5 - Prob. 18CYBKCh. 5 - Prob. 19CYBKCh. 5 - Which management assertion is usually most...Ch. 5 - Prob. 21CYBKCh. 5 - Prob. 22CYBKCh. 5 - Prob. 23CYBKCh. 5 - Prob. 24CYBKCh. 5 - Prob. 25CYBKCh. 5 - Prob. 26CYBKCh. 5 - Prob. 27CYBKCh. 5 - Prob. 28CYBKCh. 5 - Prob. 29CYBKCh. 5 - Prob. 30CYBKCh. 5 - Prob. 31CYBKCh. 5 - Prob. 32CYBKCh. 5 - Prob. 33CYBKCh. 5 - Prob. 34CYBKCh. 5 - Prob. 35CYBKCh. 5 - Prob. 36CYBKCh. 5 - Prob. 37CYBKCh. 5 - Prob. 38CYBKCh. 5 - Prob. 39CYBKCh. 5 - Prob. 40CYBKCh. 5 - Prob. 41CYBKCh. 5 - Prob. 42CYBKCh. 5 - Prob. 43CYBKCh. 5 - Prob. 44CYBKCh. 5 - Prob. 45CYBKCh. 5 - Prob. 46CYBKCh. 5 - Prob. 47CYBKCh. 5 - Prob. 48CYBKCh. 5 - Prob. 1RQSCCh. 5 - Prob. 2RQSCCh. 5 - Prob. 3RQSCCh. 5 - Prob. 4RQSCCh. 5 - Prob. 5RQSCCh. 5 - Prob. 6RQSCCh. 5 - Professional guidance indicates that the auditor...Ch. 5 - Identify the accounts associated with the...Ch. 5 - Assume that an organization asserts that it has...Ch. 5 - Prob. 10RQSCCh. 5 - Prob. 11RQSCCh. 5 - Prob. 12RQSCCh. 5 - Prob. 13RQSCCh. 5 - List factors that might affect an audit firm’s...Ch. 5 - Prob. 15RQSCCh. 5 - Prob. 16RQSCCh. 5 - Prob. 17RQSCCh. 5 - Prob. 18RQSCCh. 5 - Prob. 19RQSCCh. 5 - Prob. 20RQSCCh. 5 - Prob. 21RQSCCh. 5 - Prob. 22RQSCCh. 5 - Prob. 23RQSCCh. 5 - Prob. 24RQSCCh. 5 - Prob. 25RQSCCh. 5 - Prob. 26RQSCCh. 5 - Prob. 27RQSCCh. 5 - Prob. 28RQSCCh. 5 - Prob. 29RQSCCh. 5 - Prob. 30RQSCCh. 5 - Prob. 32RQSCCh. 5 - Prob. 33RQSCCh. 5 - Prob. 34RQSCCh. 5 - Prob. 35RQSCCh. 5 - Prob. 36RQSCCh. 5 - Prob. 37RQSCCh. 5 - Prob. 38RQSCCh. 5 - Prob. 39RQSCCh. 5 - Prob. 40RQSCCh. 5 - Prob. 42RQSCCh. 5 - Prob. 43RQSCCh. 5 - Prob. 44FF
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- Assume that management is gathering evidence as part of its process for assessing the effectiveness of internal control over financial reporting. The company is a manufacturer of high-dollar specialized Control Tested machines used in the medical profession. The following table identifies important controls that management is testing regarding accounts related to revenue recognition, accounts receivable, and other sales related activities. The first column describes the control, and the second column describes the test results. Based on the test results, determine the conclusion that management should likely make about the deficiency. (Is it a control deficiency, a significant deficiency, or a material weakness?)arrow_forwardWhich of the following is desirable in a good system of internal accounting controls? Select one: O O O a. Develop plans and budgets b. Encourage employee collusion c. Maintain adequate accounting records d. Two of the above e. None of the abovearrow_forward33) Which threat may occur when, because of a close relationship, a professional accountant becomes too sympathetic to the interests of others? a) Self-interest threats b) Advocacy threats c) Familiarity threats d) Self-review threatsarrow_forward
- What is the concept behind separation of duties in establishing internal control? a. Employee fraud is less likely to occur when access to assets and access to accounting records are separated. b. The company’s financial accountant should not share information with the company’s tax accountant. c. Duties of middle-level managers of the company should be clearly separated from those of top executives. d. The external auditors of the company should have no contact with managers while the audit is taking place.arrow_forwardWhich of the following are correct regarding why management uses internal controls? (Check all that apply.) Multiple select question. Protect assets. Uphold company policies. Ensure reliable accounting. Reduce vendor payables. Increase revenues. Promote efficient operations.arrow_forwardWhich one of the following is not an objective of a system of internal controls? Select one: 1. Overstate liabilities in order to be conservative 2. Enhance the accuracy and reliability of accounting records 3. Safeguard company assets 4. Reduce the risks of errorsarrow_forward
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- Which of the following is true of internal control? A. Internal control procedures tend to diminish the importance of operational efficiency. B. A company's outside auditor is responsible for the company's internal control system. C. Internal controls are only necessary for public companies. D. One of the major purposes of internal control is to ensure that the assets are safeguarded.arrow_forwardWhich of the following is false about accounting information systems?A. They provide reports that people analyze.B. They prevent errors and stop employees from stealing inventory.C. They are designed to gather data about the company’s transactions.D. They consist of processes that involve input of data from source documents, processing, output, andstorage.arrow_forwardWhich of the following is false about accounting information systems? A. They provide reports that people analyze. B. They prevent errors and stop employees from stealing inventory. C. They are designed to gather data about the companys transactions. D. They consist of processes that involve input of data from source documents, processing, output, and storage.arrow_forward
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