AUDITING & ASSURANCE SERVICES CONNECT AC
10th Edition
ISBN: 9781259292057
Author: MESSIER
Publisher: MCG
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Question
Chapter 7, Problem 7.36P
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 only if it leads to material misstatement, its exposure to loss or fraud in financial statements.
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.
The nature of deficiencies from each of the given scenarios.
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Students have asked these similar questions
Following are examples of control deficiencies that may represent significant deficiencies or material weaknesses. For each of the following scenarios, indicate whether the deficiency is a significant deficiency or material weakness. Justify your decision.
a. During its assessment of ICFR, the management of Lorenz Corporation and its auditors identified the following control deficiencies that individually represent significant deficiencies:
• Inadequate segregation of duties over certain information system access controls.
• Several instances of transactions that were not properly recorded in subsidiary ledgers. While the transactions that , weren’t recorded properly were not material, the gross amount of the transactions of that type totaled up to an amount several times materiality.
• A lack of timely reconciliations of the account balances affected by the improperly recorded transactions.
b. During its assessment of ICFR, management of First Coast BankCorp and its auditors…
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.
7-36
Following are examples of control deficiencies that may represent significant deficiencies or material weaknesses. For each of the
following scenarios, indicate whether the deficiency is a significant deficiency or material weakness. Justify your decision.
a. During its assessment of ICFR, the management of Lorenz Corporation and its auditors identified the following
control deficiencies that individually represent significant deficiencies:
• Inadequate segregation of duties over certain information system access controls.
• Several instances of transactions that were not properly recorded in subsidiary ledgers. While the
transactions that weren't recorded properly were not material, the gross amount of the transactions of
that type totaled up to an amount several times materiality.
• A lack of timely reconciliations of the account balances affected by the improperly recorded
transactions.
b. During its assessment of ICFR, management of First Coast BankCorp and its auditors…
Chapter 7 Solutions
AUDITING & ASSURANCE SERVICES CONNECT AC
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
- Which one of the following is not an objective of a system of internal controls? Select one: 1. Overstate liabilities in order to be conservative 2. Enhance the accuracy and reliability of accounting records 3. Safeguard company assets 4. Reduce the risks of errorsarrow_forward1. If detective controls signal error flags, why shouldn’t these types of controls automatically make a correction in the identified error? Why are corrective controls necessary? 2. Discuss the nonaccounting services that external auditors are no longer permitted to render to audit clients. 3. Discuss whether a firm with fewer employees than there are incompatible tasks should rely more heavily on general authority than specific authority. 4. According to SAS 78/COSO, the proper segregation of functions is an effective internal control procedure. Please Discuss. PLEASE NO PLAGIARSIM. THANK YOU!!arrow_forwardThe auditor noticed that the financial statements of XYZ Company were missing some footnotes important for users for decision making. This action of management is a violation of: Select one: a. Full disclosure concept O b. Going concern concept c. Materiality concept O d. Cost benefit conceptarrow_forward
- When 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_forwardWhich of the following statements is NOT correct? a. EAMs capture transactions during processing without removing the application from service. b. EAMs support continuous monitoring of controls. c. EAMs have the potential to corrupt corporate databases d. EAMs decrease operational performance. e. All of the above are correct statements.arrow_forwardWhich of the following is NOT an example of a significant deficiency in internal control? O evidence of an effective response to identified significant risks O misstatements not prevented or detected by internal controls O evidence of an ineffective entity risk assessment process O identification of management fraudarrow_forward
- Which of the following items is an example of an inherent limitation in an intrnal control system? A. Segregation of employee duties B. Human error in decision making C. Ineffective board of directors D. Understaffed internal audit functions.arrow_forwardWhich one is correct??arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- An audit report contains the following observations: a. A service department's location is not well suited to allow adequate service to other units. b. Employees hired for sensitive position are not subjected to background checks, c. Managers do not have access to reports that profile overall performance in relation to other benchmarked organizations, d. Management has not taken corrective action to resolve past engagement observations related to inventory controls. Which two of the above enumerated observations are most likely to indicate the existence of control weaknesses over safeguarding of assets? Please explain why?arrow_forwardWhy is there a need on the part of the client entity to monitor internal controls over time? a. Because the auditor needs to obtain understanding of internal control b. Because unmonitored controls tend to deteriorate over time c. Because it will affect the timing of substantive audit procedures d. Because it is a requirement of the applicable financial reporting frameworkarrow_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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