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
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 43CYBK
To determine
Introduction:Auditor is appointed by the company in order to get their financial statements checked whether they are authentic or reliable for further usage by the shareholders and other users.
To select: The correct option regarding the performance of substantive
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Audit standards distinguish auditors’ responsibility for planning procedures for detecting noncompliance with laws and regulations havinga direct effect on financial statements versus planning procedures for detecting noncompliance with laws and regulations that do not have a direct effect on financial statements.Required:a. What are the requirements for auditors to plan procedures to detect direct-effect compliance versus indirect-effect compliance?b. For each of the following instances of noncompliance, explain why they are either directeffect (D) or indirect-effect (I) noncompliance:1. A manufacturer inflates expenses on its corporate tax return.2. A retailer pays men more than women for performing the same job.
3. A coal mining company fails to place proper ventilation in its mines.4. A military contractor inflates the overhead applied to a combat vehicle.5. An insurance company fails to maintain required reserves for losses.6. An exporter pays a bribe to a foreign government…
Which of the following statements best describes auditors’ responsibility for detecting a client’s noncompliance with a law or regulation?a. The responsibility for detecting noncompliance exactly parallels the responsibility for errors and fraud.b. Auditors must design tests to detect all material noncompliance that indirectly affects the financial statements.c. Auditors must design tests to obtain reasonable assurance that all noncompliance with direct material financial statement effects is detected.d. Auditors must design tests to detect all noncompliance that directly affects the financial statements.
(i) Which of the following statements correctly explains the responsibility of the external auditor?A. Responsibility to provide reasonable assurance that the financial statements are free from material error or misstatement.B. Responsibility for identifying and correcting any errors or misrepresentations in the financial statements.C. Responsibility for the reliability of the information that financial statements provide.D. Responsibility to prepare financial statements.
(ii) Operational controls are designed to prevent failures in operational procedures caused by:
i. Machine breakdown and human error
ii. Failures in the performance of systems and weaknesses in procedures.
iii. Poor management
iv. Risks of errors or fraud in accounting systems and accounting and finance activities.
A. i and ii onlyB. i, ii and iii onlyC. i, ii and iv onlyD. All of the above
(iii) Risk tolerance refers to
A. The amount of risk the company is prepared to accept in order to achieve its financial…
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
Knowledge Booster
Similar questions
- Which statement is incorrect regarding the external auditor's consideration of the work of internal auditing? а. During the course of planning the audit, the external auditor should perform a preliminary assessment of the internal audit function when it appears that internal auditing is relevant to the external audit of the financial statements in specific audit areas. b. The external auditor should consider the activities of internal auditing and their effect, if any, on external audit procedures. C. When the external auditor intends to use specific work of internal auditing, the external auditor need not evaluate and test that work to confirm its adequacy for the external auditor's purposes. d. The external auditor should obtain a sufficient understanding of internal audit activities to assist in planning the audit and developing an effective audit approach.arrow_forwardWhich of the following factors do NOT impact the auditor's decision on the mix of substantive procedures to be performed? O overall risk assessment for the client O nature of the account balance O management's opinion on the risk of the account balance O risk assessment for the specific account balancearrow_forwardThe auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk. b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelated. (AICPA, adapted)arrow_forward
- Which of the following are reasons that auditors conduct analytical procedures at the risk assessment phase of the audit? Select all that apply. O assist with the identification of risk assess if the financial statements reflect the auditor's knowledge of their client O identify accounts at risk of material misstatement O highlight unusual fluctuations in accounts O helps with the calculation of materialityarrow_forwardThe primary purpose of accumulating sufficient and appropriate audit evidence is to Group of answer choices a. Support the auditor’s opinion on the financial statements. b. Detect fraud in the financial statements. c. Defend the auditor in case of legal dispute. d. Evaluate the performance of the management of an entity.arrow_forwardThe auditor designs and performs a combination of tests of controls and substantive procedures to obtain reasonable assurance that the financial statements are fairly stated when control risk 1. is assessed below the maximum. 2. is assessed above the maximum. 3. cannot be assessed. 4. none of the abovearrow_forward
- The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelatedarrow_forwardWhich of the following best describes how the detailed audit plan of a financial statementauditor compares with the audit client’s comprehensive internal audit plan?a. The comprehensive internal audit plan covers areas that an external auditor would normally not review.b. The comprehensive internal audit plan is more detailed, although it covers fewer areasthan an external audit would normally cover.c. The comprehensive internal audit plan is substantially identical to the audit plan used byan external auditor because both review substantially identical areas.d. The comprehensive internal audit plan is less detailed and covers fewer areas than anexternal auditor would normally reviewarrow_forwardThe level of assurance the auditor should obtain to know whether the information contained in the underlying accounting records and other source data is reliable and sufficient as basis for preparation of the financial statements is: a. Moderate Assurance b. Reasonable Assurance c. No Assurance d. Absolute Assurancearrow_forward
- 6. Please answer ASAPP!!!!arrow_forwardJustify the auditor's need to evaluate conformity with applicable rules and regulations. How does this obligation vary for laws and regulations that have a direct impact on financial statements vs those that do not?arrow_forwardWhen performing a financial statement audit, auditors are required to explicitly assess the risk of material misstatement due to:Select one: a. Illegal acts. b. Fraud. c. Business risk. d. Errors.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub