Loose-leaf For Auditing & Assurance Services: A Systematic Approach
11th Edition
ISBN: 9781260687637
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 7, Problem 7.37P
To determine
Concept Introduction:
Internal control is a procedure designed by a company, to ensure whether the company’s financial or operational process is done according to the company’s regulations/policies and helps to make operations more efficient and effective. And a good performance of internal control is beneficial to make the company’s financial report more reliable.
To indicate: The significant reasons assuming that the control deficiency was a material weakness, for each cases
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Students have asked these similar questions
1. Please explain Audit of Long-term Liabilities 2. Please explain ISA540 and AU-C540. 3. What are the indicators of
possible management bias of ISA540 and AU - C 540 standards. 4. Please explain whether the presence of an indicator
of management bias means there is a material misstatement.
Which of the following controls will most likely justify a reduced assessed level ofcontrol risk for the completeness assertion for notes payable?(1) The accounting staff reviews board of director minutes for any indication ofany transactions involving outstanding debt to make sure all borrowings areincluded in the general ledger.(2) All borrowings that exceed $500,000 require approval from the board ofdirectors before loan contracts can be finalized.(3) Before approving disbursement of principal payments on notes payable, thetreasurer reviews terms in the note.(4) Accounting maintains a detailed schedule of outstanding note payable that isreconciled monthly to the general ledger.
Following are typical questions that might appear on an internal control questionnaire for investments in marketable securities.
Is custody of investment securities maintained by an employee who does not maintain the detailed records of the securities?
Are securities registered in the company name?
Are investment activities reviewed by an investment committee of the board of directors?
Assuming that the operating effectiveness of each of the above procedures is found to be inadequate, describe how the auditors might alter their substantive procedures to compensate for the increased level of control risk.
Chapter 7 Solutions
Loose-leaf For Auditing & Assurance Services: A Systematic Approach
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
- {Auditing} 42. Identify an alternative which is not a material misstatement from the following and may not influence the decision of users of financial statement? a. True and fair presentation of financial statements b. Quantitative or qualitative misstatement c. Non-compliance of legal and regulatory requirements d. Improper description of accounting policies and proceduresarrow_forwardWhich of the following statements is not true with respect to the auditors’ report on internalcontrol over financial reporting?a. The report will be dated as of the date of the financial statements.b. The report will express an opinion on the effectiveness of internal control over financialreporting.c. The auditor will issue an adverse opinion if one or more material weaknesses exist.d. The report may be presented with the report on the entity’s financial statements as a combined report.arrow_forwardPlease help me and please do not give plagiarized answer.arrow_forward
- Which 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_forward3. Identify the factors that may have contributed to the alleged flaws in the audit procedures that PwC applied in testing the year-end market values of the Lipper hedge funds’ investments. Discuss specific measures that audit firms can employ to reduce the likelihood that such factors will undercut the quality of their audits.arrow_forwardItems 1 through 6 are common questions found in internalcontrol questionnaires used by auditors to obtain an understanding of internal controlfor owners’ equity. In using the questionnaire for a client, a “yes” response indicates apossible internal control, whereas a “no” indicates a potential deficiency.1. Are all entries in the owners’ equity accounts authorized at the proper level in theorganization?2. Are issues and retirements of stock authorized by the board of directors?3. Does the company use the services of an independent registrar or transfer agent?4. If an independent registrar and transfer agent are not used:(a) Are unissued certificates properly controlled?(b) Are cancelled certificates mutilated to prevent their reuse?5. Are common stock master files and stock certificate books periodically reconciledwith the general ledger by an independent person?6. Is an independent transfer agent used for disbursing dividends? If not, is an imprestdividend account maintained?arrow_forward
- Statement 1: If management fails to list an unasserted claim in the letter of inquiry to a lawyer, the lawyer is not required to inform the auditors of the omission. Statement 2: Normally, general risk contingencies need not be disclosed in the financial statements. Statement 3: If not adjusted, a situation in which the total likely misstatement in the financial statements exceeds a material amount is likely to lead to an audit report modification. A. only one statement is true B. only two statements are true C. All are true D. All are falsearrow_forwardIf the company is subject to PCAOB obligations for communicating control shortcomings (AS 1305), what written assurances concerning internal control over financial reporting should auditors seek from the client?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
- {Auditing} 20. The audit is done to assure the users of the financial statements that all the financial information is properly and completely presented in the financial reports that depicts true and fair view of the entity supported by sufficient and reliable evidence.What kind of report must an auditor submit if he is not able to obtain audit evidence of possible material misstatement that is pervasive? a. He can form qualified opinion b. Disclaimer of opinion c. None of the options d. He can form unmodified opinionarrow_forwardWhich report would not be appropriate for a public accounting firm to provide on financial reporting controls?a. Unqualified—no material weaknesses found.b. Disclaimer of opinion—unable to perform all necessary procedures.c. Disclaimer of opinion—significant deficiencies exist.d. Adverse—material weaknesses exist.arrow_forwardIf the company is subject to PCAOB obligations involving notification of control shortcomings (AS 1305), what written assurances concerning internal control over financial reporting should auditors seek from the client?arrow_forward
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