DATA ANALYTICS FOR ACCOUNTING W/CONNECT
1st Edition
ISBN: 9781260574449
Author: RICHARDSON
Publisher: MCG
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Question
Chapter 5, Problem 5P
To determine
Identify the approach a company uses when the continuous audit system has too many alarms which are false positives. In addition, explain the reasons for approach that would change when there are too many missed abnormal events of false negatives.
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Students have asked these similar questions
Which sentence below is true about audit risk:
A.
Audit risk is the risk that a company may hire an incompetent auditor.
B.
Audit risk can be completely eliminated through appropriate sampling of transactions.
C.
Audit is what creates the demand for an audit.
D.
Audit risk is the risk that a "clean" opinion will be issued when, in reality, the financial statements are materially misstated..
Why do you think companies were not able to detect the fraud in their previous audit?
Why do fraud examiners treat data differently than auditors? Why is this so?
Chapter 5 Solutions
DATA ANALYTICS FOR ACCOUNTING W/CONNECT
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Similar questions
- How do fraud examiners approach data differently than auditors? Why is this significant?arrow_forwardWhich of the following would a fraudster perceive as a pressure?A. lack of management oversightB. everyone does itC. living beyond one’s meansD. lack of an internal audit functionarrow_forwardWhy is the audit team more concerned with controlling the exposure to the risk of overreliancethan with the risk of underreliance?a. Only the risk of overreliance results in an incorrect audit decision.b. The risk of underreliance is not related to the audit team’s study and evaluation of internalcontrol.c. The risk of overreliance can ultimately result in the audit team’s failing to reduce auditrisk to acceptable levels.d. The risk of underreliance can be controlled by performing tests of controls during theinterim period.arrow_forward
- Why do fraud examiners handle information in a different manner than auditors? Why is thisimportant?arrow_forwardtch the type of risk with the related definition.A. Detection riskB. Control riskC. Inherent riskD. Audit risk___ 1. The probability that an auditor will give an inappropriate opinion on financial statements.___ 2. The probability that audit procedures will fail to produce evidence of material misstatements.___ 3. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system.___ 4. The probability that material misstatements have occurred in transactions entering the accounting system.arrow_forwardGive one reason why performing advisory services could enhance audit quality. Give one reason why performing advisory services could weaken audit quality. Do you think performing advisory services for audit clients should be restricted? Why or why not?arrow_forward
- How can an auditor reduce a client’s inherent risk?arrow_forwardAssuming a lack of internal control in a client's system, the risk of material misstatement is known as? O Inherent risk Client risk O Detection risk O Audit riskarrow_forwardJamie is an auditor. While preparing to audit his client, FoodCourt, he finds a weakness in the company's internal control that might suggest that the company has a higher than normal risk, and revenue may have been recorded in the wrong period. Given this weakness, what information should be communicated to management?arrow_forward
- As an auditor, you run across some abnormalities in a company’s books. What you find, makes you a bit suspicious, by you do not see any reason that this would be fraud or embezzlement, they are just not following GAAS. You decide to issue an opinion letter – what should you do when issuing the opinion letter? Group of answer choices A. Issue a qualified opinion, which states that you see a specific error B.Issue an adverse opinion, where you point out that their financials are not created according to GAAS C. Report them immediately to the SEC D. Nothing, the letter should stand on it’s ownarrow_forwardA company's records for auditing have been destroyed. Would it be okay if the auditor asked the client to reproduce the data.arrow_forwardIn which of the following circumstances would an auditor expect to find that an entity had implemented automated controls to reduce risks of misstatement?a. When errors are difficult to predict.b. When misstatements are difficult to define.c. When large, unusual, or nonrecurring transactions require judgment.d. When transactions are high volume and recurring.arrow_forward
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