An important part of Phase II of the audit opinion formulation process is determining how to respond to identified risks of material misstatement. As indicated in Exhibit 5.8, the auditor might respond by modifying evidence decisions about the extent or nature of audit evidence. Using the box of evidence analogy, explain these responses to identified risks.
Answer to relevant QuestionsRefer to the Auditing in Practice feature, "Risk Assessment Procedures and Tests of Operating Effectiveness of Controls." Can risk assessment procedures be used as tests of controls? Explain.In analyzing the results of the tests of controls, there are two potential outcomes: (a) Deficiencies are identified (b) Deficiencies are not identified. What are alternative courses of action for the financial statement ...What substantive procedures could an auditor use to determine that all purchases debited to a fixed asset account in the current year are properly valued?In March 2006, General Motors (GM) announced that it needed to restate its prior year's financial statements.Excerpts from the Wall Street Journal describing the restatements include the following:● GM, which already faces ...Assume that you want to test an entity-wide control related to the control environment. Specifically, you want to obtain evidence that the audit committee has periodic discussions about fraud. Recall that tests of controls ...
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