EBK AUDITING & ASSURANCE SERVICES: A SY
10th Edition
ISBN: 9781259293245
Author: Jr
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 7, Problem 7.35P
a
To determine
Introduction:
Control deficiencies evaluation: The significance of control deficiency depends on the occurrence of misstatement and degree of misstatement. A deficiency in internal control is characterized as a significant deficiency onlyif it leads to material misstatement, its exposure to loss or fraud in financial statements.
Each of the given deficiencies is a significant deficiency or a material weakness.
b
To determine
Introduction:
Control deficiencies evaluation: The significance of control deficiency depends on the occurrence of misstatement and degree of misstatement. A deficiency in internal control is characterized as a significant deficiency only if it leads to material misstatement, its exposure to loss or fraud in financial statements.
Each of the given deficiencies isa significant deficiency or a material weakness.
c
To determine
Introduction:
Control deficiencies evaluation: The significance of control deficiency depends on the occurrence of misstatement and degree of misstatement. A deficiency in internal control is characterized as a significant deficiency only if it leads to material misstatement, its exposure to loss or fraud in financial statements.
Each of the given deficiencies isa significant deficiency or a material weakness.
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Students have asked these similar questions
The table below shows the financial process with corresponding significant account and relevant assertions. Each financial process shows what could go
wrong (WCGW). Identify the relevant control to address each WCGW. Answers should be in not less than three sentences.
Significant account and
Relevant control to
Financial Process
What Could Go Wrong
relevant assertion(s)
address WCGW
Purchase order is inappropriate because:
the purchase order does not match a valid requisition;
Purchases
Trade accounts payable (EA)
purchase is at incorrect price; or an inappropriate or
authorized vendor is selected.
Plant, equipment and leasehold Errors are made in the capitalization of fixed assets because:
Property, plant and
improvement, net (EAO)
inappropriate items are capitalized; items are capitalized at
equipment
Land and Building, net (EAO)
an inappropriate amount; or additions are not recorded.
Answer with text and/or attachments:
Which of the following procedures is least effective in preventing the purchasing agent from receiving kickbacks?
a. Prenumbering and periodically accounting for all purchase orders
b. Requiring purchasing agents to disclose any financial investments in potential suppliers
c. Requiring approval of all purchase orders
d. Maintaining a list of approved vendors and requiring all purchases to be made from vendors on that list
The following set of items describes activities completed by a company in purchasing and
paying for merchandise. For each activity, identify whether or not the activity adheres to or
violates sound internal control procedures.
The receiving department compares the quantity received with the quantity printed
on the receiving report when the purchase order was prepared.
O d. Cannot be determined.
O c. Neither strengthens nor violates internal control
O b. Violates sound internal control procedures
O a. Adheres to sound internal control procedures
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
- According to Professional Judgment, one of the environmental factors affecting judgment is the "rush to solve" judgement trap. Briefly describe the trap and how it applies to the situation affecting the recording of the sales transaction.arrow_forwardWhich of the following best describes the effect of a contingent fee arrangement on the auditor's independence. A. The contingent fee arrangement does not impair independence if it is consistent with the registered public accountingfirm's quality control policies. B. The contingency fee arrangement impairs independence. C. The contingent fee arrangement does not impair independence unless more than half of the fee is subject to contingencies. D. The contingent fee arrangement impairs independence unless approved by the client's audit committee.arrow_forwardA serious exposure for an organization that is connnected with the revenue cycle is the loss of assets. What is the related threat and applicable contrtol procudure associated with this exposure? A. receiving unordered goods; compare to valid order B. billing errors; reconciliation of shipping documents to sales order C. shipping errors, data entry controls D. theft of inventory; documentation of all internal transfers of inventoryarrow_forward
- Allowing only certain employees to order goods and services for the company is an example of what internal control procedure? a.Proper authorization b.Independent verification c.Segregation of duties d.Safeguarding of assets and recordsarrow_forwardVendor invoices are recorded for items that were never ordered by the company. Which of the following controls can best address this issue? O Procedures for rejected inputs O Reconcile bank account O Independent authorization to make payment Independent validation of vendor invoicesarrow_forwardPayable ICQ Items: Assertions, Tests of Controls, and Possible Errors or Frauds. Following is a selection of items from internal control questionnaires.1. Are purchase orders above a certain level approved by an officer?2. Are the quantity and quality of goods received determined at the time of receipt by receiving personnel independent of the purchasing department?3. Are vendors’ invoices matched against purchase orders and receiving reports before a liability is recorded?4. Are journal entries authorized at appropriate levels?Required:For each preceding item:a. Identify the management assertion to which it applies.b. Specify one test of controls auditors could use to determine whether the control was operating effectively.c. Give an example of an error or fraud that could occur if the control were absent or ineffective.d. Write a substantive procedure that could find errors or frauds that could result from the absence or ineffectiveness of the control items.arrow_forward
- Under what circumstances would an auditor choose to confirminformation such as the right of return or special sales terms in addition to the customerbalance?arrow_forwardWhich of the following are principles of internal control? (Check all that apply.) Multiple select question. Increase revenues. Establish responsibilities. Maintain adequate records. Reduce vendor payables. Perform regular and independent reviews. Divide responsibility for related transactions.arrow_forwardWhich of the following statements concerning internal control procedures for merchandise sales is not correct? a.Accounting for a sale begins with the receipt of a purchase order or some similar document from a customer. b.Shipping and billing documents are prepared based on the order document. c.A sale and its associated receivable are recorded only when the order, shipping, and billing documents are all present. d.The order document is not necessary for the buyer to be obligated to accept and pay for the ordered goods.arrow_forward
- which of these substantive procedures is not used to obtain evidence about contingencies?a. Scanning expense accounts for credit entries.b. Obtaining a letter from the client’s attorney.c. Reading the minutes of the board of directors’ meetings.d. Examining terms of sale in sales contractsarrow_forwardThe AICPA Code of Professional Conduct would be violated if a CPA accepted a fee for services and the fee was: Select one: Based on a price quotation submitted in competitive bidding. Payable if the audit of the financial statements led to a loan. Determined based on the results of judicial proceedings. Fixed by a public authority.arrow_forwardFor effective internal control, the accounts payable department generally should(1) stamp, perforate, or otherwise cancel supporting documentation after paymentis mailed.(2) ascertain that each requisition is approved as to price, quantity, and quality byan authorized employee.(3) omit information about the quantity ordered on the copy of the purchase orderforwarded to the receiving department prior to receipt of goods.(4) establish the agreement of the vendor’s invoice with the receiving report andpurchase orderarrow_forward
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