AUDITING & ASSURANCE SERVICES CONNECT AC
10th Edition
ISBN: 9781259292057
Author: MESSIER
Publisher: MCG
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Chapter 7, Problem 7.40P
a.
To determine
Concept Introduction:
Internal audit is a process designed to improve and enhance the companies or organization’s operations, and help to assess the whole internal control, corporate governance, and accounting process of a business. The internal audit provides the board of directors and management a value-added service which corrected or audited before an external audit.
To indicate: The type of ICFR report for each situation
b.
To determine
Concept Introduction:
Internal audit is a process designed to improve and enhance the companies or organization’s operations, and help to assess the whole internal control, corporate governance, and accounting process of a business. The internal audit provides the board of directors and management a value-added service which corrected or audited before an external audit.
To indicate: The type of ICFR report for each situation
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Students have asked these similar questions
The accountant's report that expresses an opinion on an entity's internal controls would not include a
A. specific date that the report covers rather than a period of time.
B. brief explanation of the broad objectives and inherent limitations of internal control.
C. description of the scope of the engagement.
D. statement that the entitiy's internal controls are consistent with that of the prior year after giving effect to subsequent changes.
Which of the following is NOT a requirement in management’s report on the effectiveness of internal controls over financial reporting?a. A statement of management’s responsibility for establishing and maintaining adequate internal control user satisfaction. b. A statement that the organization’s internal auditors have issued an attestation report on management’s assessment of the company’s internal controls. c. A statement identifying the framework management uses to conduct its assessment of internal controls. d. An explicit written conclusion as to the effectiveness of internal control over financial reporting.
Required:
When evaluating internal control design effectiveness during the internal control over financial reporting, the audit team must
determine whether controls have been put in place for each relevant assertion about each significant account. For each relevant
assertion, the audit team must determine the points in the process where a misstatement might occur and then determine if a control
activity has been put in place to mitigate the risk of material misstatement for each relevant assertion. For each of the possible
misstatements identified below, please select the appropriate financial statement assertion:
Possible Misstatement/Risk
a. Revenue is overstated because the controller created
fraudulent invoices and recorded them.
b. Revenue is understated because the accountant closed the
sales cycle a week early to go on vacation.
c. Accounts Receivable is overstated because the accounts
receivable clerk forgot to apply available discounts.
d. Accounts Receivable is overstated…
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
- In terms of the timing of the risk response, the following procedures can be completed only at or after period end: comparing the financial statements to the accounting records, evaluating adjusting journal entries made by management in preparing the financial statements, and conducting procedures to response to risks that management may have engaged in improper transactions at period end.arrow_forwardThe external auditor of a company has certain requirements due to Sarbanes-Oxley. Which of the following best describes these requirements? A. The auditor is required to only report weaknesses in the internal control design of the company he or she is auditing. B. The auditor must issue an internal control report on the evaluation of internal controls overseen by the Public Company Accounting Oversight Board C. The auditor in charge can serve for a period of only two years. D. The Public Company Accounting Oversight Board reviews reports submitted by the auditors when no evaluations have been performed.arrow_forwardThe report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the companys auditors. Group of answer choices True Falsearrow_forward
- Which of the following is not a common procedure for assessing operating effectiveness of preventive controls? a. Observation of personnel b. Analysis of trends or ratios c. Inspection of documents d. Inquiries of managementarrow_forwardFollowing 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…arrow_forwardWhich of the following best describes the operational audit?(1) It requires constant review by internal auditors of the administrative controls asthey relate to the operations of the company.(2) It concentrates on implementing financial and accounting controls in a newlyorganized company.(3) It attempts and is designed to verify the fair presentation of a company’s resultsof operations.(4) It concentrates on seeking aspects of operations in which waste would be reducedby the introduction of controlsarrow_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 following statements is true regarding the AICPA Code of Conduct's conceptual framework approach? An auditor who identifies threats should discontinue the engagement. Olf safeguards reduce threats to an acceptable level, the auditor should discontinue the engagement. OAfter threats are identified, an auditor should apply safeguards to determine whether the threat can be reduced to an acceptable level. OAn auditor who identifies threats that are significant should discontinue the engagement.arrow_forwardThe CPA firm of Webster, Warren, & Webb LLP issued an adverse opinion on the internal control of Alexandria Financial, a public company, due to a material weakness. The weakness involved the lack of sufficient accounting expertise to evaluate and adopt appropriate accounting principles. Subsequent to issuance of the report, management of Alexandria hired a new controller to eliminate the weakness. a. Describe what steps Alexandria must perform to engage Webster, Warren, & Webb to issue a report indicating that the weakness no longer exists. b. Describe how Webster, Warren, & Webb should approach the engagement. c. Describe what Webster, Warren, & Webb must do if, during the course of the engagement, a member of the audit team discovers another material weakness in internal control over financial reporting. Will the new weakness affect the auditors’ report?arrow_forward
- Which of the following best describes the operational audit? Select one: a. It requires the constant review by internal auditors of the administrative controls as they relate to the operations of the company. b. It concentrates on seeking aspects of operations in which waste could be reduced by the introduction of controls. c. It attempts and is designed to verify the fair presentation of a company’s results of operations. d. It concentrates on implementing financial and accounting control in a newly organized company.arrow_forwardThis is a process of evaluating the effectiveness of a client's internal controls in preventing or detecting material misstatements in the financial statements is called __________________ (answer in All CAPS)arrow_forwardGrounds for Dismissal. This case is designed like the ones in the chapter. Your assignment is to write the “audit approach” portion of the case organized around these sections: Objective. Express the objective in terms of the facts supposedly asserted in financial records, accounts, and statements.Control. Write a brief explanation of desirable controls, missing controls, and especially the types of “deviations” that might arise from the situation described in the case.Tests of controls. Write some audit procedures for getting evidence about existing controls, especially procedures that could discover deviations from controls. If there are no controls to test, then there are no procedures to perform; go to the next section. A “procedure” should instruct someone about the source(s) of evidence to tap and the work to do. Audit of balance. Write some procedures for getting evidence about the existence, completeness, valuation or allocation, or rights and obligations assertions identified…arrow_forward
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