EBK AUDITING & ASSURANCE SERVICES: A SY
11th Edition
ISBN: 9781260687668
Author: Jr
Publisher: MCGRAW-HILL LEARNING SOLN.(CC)
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Question
Chapter 7, Problem 7.26MCQ
To determine
Introduction:
Internal Control is a policy, procedure, set of rules, designed and implemented by management and those charged with governance, so as to obtain reasonable assurance regarding achievement of entity’s objective, to safeguard assets and protect from any chance of fraud or error. Its objective is operational efficiency and effectiveness for reliable financial reporting.
The auditor during an audit checks whether Internal Control exists or not, and if it exists it is effective or not and followed in continuation or not.
An Interim Period Audit means audit for the work carried out before financial year end.
Interim Period is any period less than 1 fiscal year.
To define: Effectiveness of internal Control after Interim Date
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In considering the evidence needed to assess control risk during the period from interim to year-end, all of the following should be considered except the:
A. Significance of the assertion being tested.
B. Control risk on other assertions.
C. Specific internal control policies and procedures tested during the interim period.
D. Degree to which the policies and procedures were tested and the test reults.
1. Which of the following procedures is most appropriately done if the control risk and inherent risk was assessed at a below maximum level where the management does not have effective internal controls in place? *
Omit test of controls, then perform substantive testing at year-end
Perform tests of controls, then perform substantive testing at year-end
Perform tests of controls, then perform substantive testing at an interim period
Omit test of controls, then perform substantive testing at an interim period
2. In auditing the financial statements of ESELYU Inc., the management has deliberately precluded you from gathering evidence in one of its cash accounts which you perceive to be material in regards to the audit. Which of the following audit opinion are you most likely to express? *
Qualified opinion if the item is material and pervasive
Unqualified Opinion if the item is material and…
Why do auditors typically test internal controls at an interim audit date?
O more effective to test at an interim date versus the year-end date
O auditing standards require that timing
O allows the auditor to adjust the nature and extent of planned audit procedures
O management asks for auditors to perform testing at the interim date
Chapter 7 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
Ch. 7 - Prob. 7.1RQCh. 7 - Prob. 7.2RQCh. 7 - Prob. 7.3RQCh. 7 - Prob. 7.4RQCh. 7 - Prob. 7.5RQCh. 7 - Prob. 7.6RQCh. 7 - Prob. 7.7RQCh. 7 - Prob. 7.8RQCh. 7 - Prob. 7.9RQCh. 7 - Prob. 7.10RQ
Ch. 7 - Prob. 7.11RQCh. 7 - Prob. 7.12RQCh. 7 - Prob. 7.13RQCh. 7 - Prob. 7.14RQCh. 7 - Prob. 7.15RQCh. 7 - Prob. 7.16RQCh. 7 - Prob. 7.17RQCh. 7 - Prob. 7.18RQCh. 7 - Prob. 7.19MCQCh. 7 - Prob. 7.20MCQCh. 7 - Prob. 7.21MCQCh. 7 - Prob. 7.22MCQCh. 7 - Prob. 7.23MCQCh. 7 - Prob. 7.24MCQCh. 7 - Prob. 7.25MCQCh. 7 - Prob. 7.26MCQCh. 7 - Prob. 7.27MCQCh. 7 - Prob. 7.28MCQCh. 7 - Prob. 7.29MCQCh. 7 - Prob. 7.30MCQCh. 7 - Prob. 7.31MCQCh. 7 - Prob. 7.32MCQCh. 7 - Prob. 7.33MCQCh. 7 - Prob. 7.34PCh. 7 - Prob. 7.35PCh. 7 - Prob. 7.36PCh. 7 - Prob. 7.37PCh. 7 - Prob. 7.38PCh. 7 - Prob. 7.39PCh. 7 - Prob. 7.40PCh. 7 - Prob. 7.41PCh. 7 - Prob. 7.42PCh. 7 - Prob. 7.43PCh. 7 - Prob. 7.44PCh. 7 - Prob. 7.45P
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Similar questions
- When the auditor has assessed control risk of a particular area at a reduced level, he or she will then Select one: a. eliminate the need to gather evidence in that area. b. test the effectiveness of the controls in that area. c. proceed to expand the sample sizes in that area. d. negotiate with management to determine which controls will be tested in that area.arrow_forwardexplain .After documenting internal control in an audit engagement, the auditor may perform tests on Those controls that the auditor plans to rely on. Those controls in which deficiencies were identified. Those controls that have a material effect on the financial statement balances. A random sample of the controls that were reviewed.arrow_forwardAs the acceptable level of detection risk decreases, an auditor may change the a. Timing of substantive tests by performing them at an interim date rather than at year-end. b. Assessed level of control risk. c. Timing of tests of controls by performing them at several dates rather than at one time. d. Assessed level of inherent risk to a higher amount. e. Nature of substantive procedures from a less effective to a more effective procedure.arrow_forward
- Auditing standards indicate that if the preliminary control risk assessment is low, the auditor then gains assurance that the controls are operating effectively. What is meant by testing the operating effectiveness of controls? How does an auditor decide which controls to test?arrow_forwardHenrietta Lombardi assessed control risk to be low. What is the appropriate audit strategy she should adopt? a) predominantly substantive audit approach b) control testing strategy c) combined audit strategy d) substantive year end testingarrow_forwardSupervision and review are essential parts of managing an engagement. When the auditor obtains audit evidence about the operating effectiveness of controls during an interim period, that is enough to support reliance to reduce substantive procedures to be performed at year-end. Group of answer choices True, False True, True False, True False, Falsearrow_forward
- Which of the following risk types increase when an auditor performs substantive analytical audit procedures for financial statement accounts at an interim date?a. Inherent.b. Control.c. Detection.d. Sampling.arrow_forwardOnce the auditor detects a control deficiency, which of the following steps must he or shetake first?a. Perform tests of other controls related to the same assertion as the control deemedineffective.b. Evaluate the severity of the deficiency on the auditor’s control risk assessment for thatassertion.c. Modify the planned substantive procedures as a result of the deficiency.d. Test the deficient control, assuming a maximum level of risk.arrow_forwardAfter the audit planning procedures, your audit team decided to place the preliminary audit risk at a high level. Which of the following is correct? A. The risk the planned further audit procedures will not be able to detect misstatement should be increased. B. The auditors should plan set the timing of its extensive substantive testing at year-end. C. The audit materiality levels should be increased. D. The auditors should plan extensive substantive testing through analytical procedures.arrow_forward
- When can controls tested by an auditor in a prior year be used in the current year's audit assessment?arrow_forwardWhich of the following describes the circumstances that exist when an auditor assesses control risk as high? O controls are not properly designed or implemented O good internal controls are in place auditor will test the controls to verify they were effective throughout the period O auditor should test the controlsarrow_forwardAs the acceptable level of detection risk increases, an auditor may: Oa. Lower the assessed level of inherent risk. O b. Eliminate the assessed level of control risk from consideration as a planning factor. O c. Change the planned timing of substantive tests from year-end to interim. Od. Increase the risk of material misstatement.arrow_forward
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