Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
10th Edition
ISBN: 9780077732509
Author: William F Messier Jr, Steven M. Glover Associate Professor, Douglas F. Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Question
Chapter 6, Problem 6.22MCQ
To determine
Concept Introduction:
Internal controls are policies and procedures defined by the management to ensure the smooth functioning of the business processes. Internal controls ensure the complete and correct accounting and safeguards to the assets.
Deficiencies are failure of the internal control to perform effectively. The auditor decides if the deficiency is significant deficiency for his planning of the
To choose: The reason for communication of significant control deficiencies and material weaknesses to the audit committee.
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Students have asked these similar questions
In a financial statement audit, inherent risk represents
a. The risk that misstatements could occur and not be detected by the auditor's procedures.
b. The risk that misstatements could occur and not be prevented or detected by the system of internal control.
c. The risk that the auditor fails to modify materially misstated financial statements.
d. The susceptibility of an account balance to misstatement that could be material.
With respect to fraudulent financial reporting, which one of the following statements is not correct?
a.The risk that the auditor will not detect misstatement due to management fraud is greater than those due to employee fraud.
b.It is difficult for the auditor to determine if misstatements in accounting estimates are caused by fraud or error.
c.When the audit is properly planned and performed in accordance with ISAs, material misstatements are guaranteed to be detected by the auditor.
d.Excessive pressure on management to meet expectations of third parties creates incentives for
In accounting, which term describes deficiencies or flaws in the design or operation of internal controls that could increase the risk of errors, fraud, or misstatements in financial reporting? a) External audit b) Compliance review c) Internal control weaknesses d) Financial statement analysis
Chapter 6 Solutions
Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
Ch. 6 - Prob. 6.1RQCh. 6 - Prob. 6.2RQCh. 6 - Prob. 6.3RQCh. 6 - Prob. 6.4RQCh. 6 - Prob. 6.5RQCh. 6 - Prob. 6.6RQCh. 6 - Prob. 6.7RQCh. 6 - Prob. 6.8RQCh. 6 - Prob. 6.9RQCh. 6 - Prob. 6.10RQ
Ch. 6 - Prob. 6.11RQCh. 6 - Prob. 6.12MCQCh. 6 - Prob. 6.13MCQCh. 6 - Prob. 6.14MCQCh. 6 - Prob. 6.15MCQCh. 6 - Prob. 6.16MCQCh. 6 - Prob. 6.17MCQCh. 6 - Prob. 6.18MCQCh. 6 - Prob. 6.19MCQCh. 6 - Prob. 6.20MCQCh. 6 - Prob. 6.21MCQCh. 6 - Prob. 6.22MCQCh. 6 - Prob. 6.23MCQCh. 6 - Prob. 6.24MCQCh. 6 - Prob. 6.25PCh. 6 - Prob. 6.26PCh. 6 - Prob. 6.27PCh. 6 - Prob. 6.28PCh. 6 - Prob. 6.29PCh. 6 - Prob. 6.30PCh. 6 - Prob. 6.31P
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Similar questions
- The auditor’s primary consideration is whether, and how, internal control prevents, or detects and corrects: illegal actions of the Management None of these options Material misstatement of the entity’s financial statements Incentives that prompt an employee to behave improperlyarrow_forwardThe following are examples of circumstances that may indicate the possibility that the financial statements may contain a material misstatement resulting from fraud, except Group of answer choices Last-minute adjustments that significantly affect financial results or unusual journal entries. Transactions that are recorded in a complete or timely manner or are properly recorded as to amount, accounting period, classification, or entity policy. Unsupported or unauthorized balances or transactions. Tips or complaints to the auditor about alleged fraud.arrow_forwardWhen evaluating an internal control deficiency as part of a financial statement audit, the primary difference between a significant deficiency and a material weakness depends on: Multiple Choice whether there is a reasonable possibility that the company's internal control system will fail to prevent or detect and correct a misstatement of an account balance or disclosure. whether a misstatement has actually occurred as a result of the deficiency or the deficiencies. the magnitude of the potential misstatement resulting from the deficiency or the deficiencies. All of the choices are correct.arrow_forward
- When completing the audit of internal controls for an issuer, the severity of an internal control deficiency depends ona. Whether there is a reasonable possibility that the company’s controls will fail to prevent or detect a misstatement of an account balance or disclosure.b. Whether a misstatement has actually occurred as a result of the deficiency.c. The magnitude of the potential misstatement resulting from the deficiency or the deficiencies.d. Both a and c are correct.e. All of the above are correct.arrow_forwardWhich of the factors below is NOT one of the purposes of the audit report? A. Indicate any scope limitations in the audit examination B. Indicate unusual matters as going concern uncertainty for the company. C. Indicate whether the financial statements are in accordance with the financial standards framework. D. Indicate the effects of occupational fraud.arrow_forwardAn independent auditor has the responsibility to design the audit to providereasonable assurance of detecting errors and fraud that might have a material effecton the financial statements. Which of the following, if material, is a fraud as definedin auditing standards?(1) Misappropriation of an asset or groups of assets.(2) Clerical mistakes in the accounting data underlying the financial statements.(3) Mistakes in the application of accounting principles.(4) Misinterpretation of facts that existed when the financial statements were prepared.arrow_forward
- An audit opinion of a company’s fi nancial reports is most likely intended to:A . detect fraud.B . reveal misstatements.C . assure that fi nancial information is presented fairly.arrow_forward3. Which of the following is NOT part of the control activities applicable to Financial Statement Audit? a. Segregation of duties to prevent opportunities to commit fraud , conceal errors and other irregularities b. Performance Review like comparison of actual performance with budget, forecasts and previous year's performance c. Compliance to reportorial requirements to regulatory bodies. d. Physical controls, ensuring adequate safeguards over access to assets and records.arrow_forwardWhich one of the following statements is not included in the management representation letter provided to the auditor at the end of the audit? O It is the management’s responsibility to prepare financial statement and design and maintain effective internal control over financial reporting. O The management has provided all necessary information and documents to the auditor to enable the auditor to complete the audit. O Any remaining misstatements in the financial statements are immaterial. O There is no material weakness in internal control over financial reporting.arrow_forward
- When planning the audit, the auditor must make enquiries of management. Which one of the following is not an appropriate enquiry of management about fraud? a.The auditor should ask management if they are personally engaged in fraudulent activity, including fraudulent financial reporting and misappropriation of assets. b.The auditor should ask about management's communications with employees about ethical behavior. c.The auditor should ask management about any communications with those charged with governance regarding its processes for identifying and responding to the risks of fraud in the entity. d.The auditor should ask management about their assessment of the risk that the financial statements may be materially misstated due to fraud.arrow_forwardThe requirement for an attitude of scepticism means that the auditor should A) perform additional tests of controls to increase the probability of discovering fraud or errors. B) plan and conduct the audit with an attitude of distrust in management. C) not be blind to evidence that suggests the documents, books, or records have been altered or are incorrect. D) not consider management's explanation as evidence on any subjectarrow_forwardIf the auditor believes that a misstatement is or might be intentional and the effect on the financial statements could be material or cannot be readily determined, the auditor should do which of the following?a. Inquire of management as to the possibility of fraud.b. Discuss with the audit committee what should be done to prevent possible future misstatements.c. Perform procedures to obtain additional audit evidence to determine whether fraud has occurred or is likely to have occurred.d. Both a and b are correct.e. None of these is correct.arrow_forward
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