AUDITING RMU
11th Edition
ISBN: 9781260934830
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 7, Problem 7.42P
To determine
Introduction:
Auditor report on ICFR: After auditing the effectiveness of an entity’s internal control, the auditor has to issue an opinion. If internal control is operating effectively in all material aspects, the auditor will issue an unqualified opinion. If any material weaknesses are identified, the auditor will issue an adverse opinion.
The draft of auditor’s report for an audit of ICFR for the given material weakness.
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Students have asked these similar questions
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…
3. Which of the following is NOT part of the control activities applicable to Financial Statement Audit?
a. Segregation of duties to prevent opportunities to commit fraud , conceal errors and other irregularities
b. Performance Review like comparison of actual performance with budget, forecasts and previous year's performance
c. Compliance to reportorial requirements to regulatory bodies.
d. Physical controls, ensuring adequate safeguards over access to assets and records.
Service organization control (SOC) reports may be requested by auditors when a service organization processes transactions related
to a client's (user organization) internal control over financial reporting.
Required:
For each of the following statements related to Service Organization Control (SOC) reports, indicate whether it is appropriately related
to a Type 1 report (T1), Type 2 report (T2), both a Type 1 and Type 2 report (B), or neither a Type 1 or Type 2 report (N).
a. Disclaims an opinion on the fairness of the entity's financial statements.
b. Provides a description of the service organization's internal control over financial reporting.
c. Summarizes tests of operating effectiveness of controls at the service organization.
d. Expresses an opinion on the suitability of design of internal controls over financial reporting. B
e. Use of the service auditor's report is restricted to specified parties.
f. Would be requested when client is an issuer.
g. Disclaims an opinion on the…
Chapter 7 Solutions
AUDITING RMU
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
- 26. The auditor shall communicate with those charged with governance an overall approach and scope of the audit , which includes communicating about the___________ identified by the auditor. a. Agreements with management b. Material weaknesses c. Significant risks d. Accounting Entriesarrow_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_forward10. Please help me asap!!!arrow_forward
- The primary purpose for obtaining an understanding of a nonpublic audit client’s internal control is toa. Provide a basis for making constructive suggestions in a management letter.b. Determine the nature, timing, and extent of further audit tests to be performed.c. Provide the rationale for the inherent risk assessment at the financial statement assertion level.d. Provide information for a communication of internal control–related matters to management.arrow_forwardWhich of the following types of evidence would an auditor most likely examine to determine whether internal control is operating as designed?Select one: a. Client records documenting the use of computer programs. b. Gross margin information regarding the client’s industry. c. Confirmations of receivables verifying account balances. d. Anticipated results documented in budgets or forecasts.arrow_forwardTests of controls in a GAAS audit are required fora. Obtaining evidence about the financial statement assertions.b. Accomplishing control over the occurrence of recorded transactions.c. Applying analytical procedures to financial statement balances.d. Obtaining evidence about the operating effectiveness of client control activitiearrow_forward
- Tests of controls in a GAAS audit are required fora. Obtaining evidence about the financial statement assertions.b. Accomplishing control over the occurrence of recorded transactions.c. Applying analytical procedures to financial statement balances.d. Obtaining evidence about the operating effectiveness of client control activities.arrow_forwardThe auditor should assess control risk for each relevant assertion by evaluating the evidence obtained from all sources, includinga. The auditor’s testing of controls for the audit of internal control on a public company.b. Misstatements detected during the financial statement audit.c. Any control deficiencies identified during the audit.d. All of the above.arrow_forwardPrepare a broad audit plan:1. What material types of transactions and transaction cycles are involved?2. What are the high-risk areas?3. What are the low-risk areas?4. If management faced tremendous pressure regarding the entity’s financial performance, what opportunities might exist for them to engage in fraudulent financial reporting?5. To what extent do you believe it will be appropriate to reduce assessed control risk?6. How will audit effort be allocated among geographical areas?7. What form of auditors’ report do you expect will be issued; what does it mean?8. Indicate as an appendix to the report how the project team was organized and how it functioned on the project and submit appendix with Team Project.arrow_forward
- Which of the following is not an implication of PCAOB Auditing Standard No. 5 and Section 404 of the Sarbanes-Oxley Act? a. None of the above are implications of Section 404. b. Disclosure of material changes in an organization's financial condition is required on a "rapid and current basis". c. Management must identify, document, and evaluate significant internal controls. d. Auditors must report on the effectiveness of the internal control systems of an organization.arrow_forwardS1: Regarding communications between auditors, the predecessor auditor has the duty to initiate communications with the successor auditor. S2: Planning means developing a general audit plan and a detailed audit strategy for the expected nature, timing and extent of the audit. S3: The primary objective of an auditor to study and evaluate existing internal control is to obtain a basis for the expression of an auditor's opinion. A. Only 1 statement is True B. Only 2 statements are True C. All statements are True D. All statementS are Falsearrow_forwardIn including an audit of financial statements , the overall objectives are the following, EXCEPT A. To conduct a critical, detailed and systematic examination of all the account balances in the financial statements, as the related document records , procedures and controls B. To obtain reasonable assurance whether financial statement as a whole are free from material misstatement whether du to fraud or error C. To report on the financial statements and communicate as required by the PSAs in accordance with the auditor’s findings D. To enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects in accordance with the applicable financial reporting frameworkarrow_forward
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