New Semester
Started
Get
50% OFF
Study Help!
--h --m --s
Claim Now
Question Answers
Textbooks
Find textbooks, questions and answers
Oops, something went wrong!
Change your search query and then try again
S
Books
FREE
Study Help
Expert Questions
Accounting
General Management
Mathematics
Finance
Organizational Behaviour
Law
Physics
Operating System
Management Leadership
Sociology
Programming
Marketing
Database
Computer Network
Economics
Textbooks Solutions
Accounting
Managerial Accounting
Management Leadership
Cost Accounting
Statistics
Business Law
Corporate Finance
Finance
Economics
Auditing
Tutors
Online Tutors
Find a Tutor
Hire a Tutor
Become a Tutor
AI Tutor
AI Study Planner
NEW
Sell Books
Search
Search
Sign In
Register
study help
business
auditing assurance services
Modern Auditing 1st Edition Graham Cosserat - Solutions
The audit partner of an accounting firm has just advised you that he has been approached to accept appointment as the auditor for Nevada Limited, a manufacturer of gaming machines. Nevada has been named in a recent anti-corruption inquiry as having offered incentives to Members of Parliament to
Your client is Megabight Ltd, a large family-owned company which imports and sells a range of computer hardware products. You are currently planning the 30 June 20X11 audit and have obtained the following information from your inquiries of management:In January 20X1, Megabight applied for and was
A small private company, Agchem Ltd, is involved in the research and development of chemicals used in the agricultural industry.The company is based in Drumnadrochit, a small remote Scottish village. The majority of the company’s 25 employees reside in the nearest town of Balbeg, an isolated
TV Tasty Ltd (TV) is in an industry which manufactures frozen food goods for the consumer market. It is a mature industry with traditional customer loyalty being eroded by take-away foods. Your firm had audited the company for the past two years. From your experience and discussion with the client
What is meant by the term ‘materiality’? What requirements are imposed on the auditors by this definition?
Why might planning materiality differ from the materiality level used in evaluating audit findings?
Discuss the differences between ‘quantitative’ and ‘qualitative’ in terms of materiality.
If the aggregated amount of audit errors is found to be material, what should the auditors do?
Define, and differentiate between, audit risk, inherent risk, control risk and detection risk.
What is the audit risk model and when is it used? Explain the interrelationships within the audit risk model.
Is it ever appropriate under Auditing Standards for the auditors to conclude that inherent and control risks are so low it is unnecessary to verify any assertions by substantive procedures for any material account balances? Explain.
Explain the interrelationships among audit risk, materiality and audit evidence.
Discuss the relative costs of the two different audit strategies.
Why may a common strategy be used for a group of assertions affected by the same class of transaction?
Which of the following statements would best describe the concept of materiality?(a) Materiality is a matter for the professional judgement of the auditors.(b) Materiality should be a matter of concern only when planning the audit.(c) Materiality relates to the amount of one item compared with
In determining an appropriate level of planning materiality for an audit, what should not be considered?(a) Prior years’ errors.(b) Trends in the industry within which the company operates.(c) The audit budget.(d) The users of the financial statements.Choose the best answer.
What would not be an example of a qualitative factor that might affect your assessment of materiality?(a) A change in accounting method that is expected to materially affect the results of subsequent financial years.(b) Transactions between the entity and a related party.(c) Expansion of the
On completion of the audit, if the auditor finds the aggregate uncorrected misstatements are material, he or she should:(a) re-evaluate the level of materiality used on the audit.(b) perform more audit procedures and/or request management to make adjustments.(c) issue a qualified audit opinion.(d)
Which of the following can be manipulated by the auditor?(a) Inherent risk.(b) Detection risk.(c) Control risk.(d) Both detection and control risk.Choose the best answer.
If the auditor makes an assessment that there is a low level of control risk and inherent risk for an entity, what would you expect the auditor to do?(a) Perform no substantive procedures.(b) Perform no control tests because of the low level of control risk.(c) Perform a relatively small number of
Which of the following best describes the nature of an audit strategy?(a) It is a detailed specification of auditing procedures to be performed.(b) It represents the auditors’ plan for meeting quality control standards.(c) It represents the auditors’ preliminary judgements about an audit
In developing an audit strategy, the auditors specify all of the following components, except:(a) the extent of understanding of the accounting and internal control systems to be obtained.(b) the tests of details of transactions and balances to be performed.(c) the preliminary assessed level of
You are an auditor in a small firm of accountants, Azlan Wong and Partners. You have been allocated the audit of Gregens Ltd and the partner calls you in to her office to discuss some planning issues. She states the following in relation to the audit: “The materiality level will be set at a level
You are the audit senior and you have just completed the audit of Fine Furs Ltd, a maker of artificial fur clothing. In performing the audit, you made an assessment that the company has a low level of inherent risk and a low level of control risk. As a result, you amended the audit plan to allow
You are currently planning the 30 June 20X11 audit of Treelop Ltd, an Australian owned company that produces and exports woodchips to Japan. Treelop’s operations are in Warrenup, in the south-west corner of Western Australia. Timber is purchased from forests nearby, processed into woodchips and
Audrey Pearce is an audit partner of Pearce Green, a firm of accountants. She is considering audit risk at the overall financial statement level in planning the audit for the finance company Homes South Ltd (HS) for the year ending 30 June 20X2. This risk is influenced by a combination of factors
Why are internal controls so important within an entity?
What were some of the important comments the COSO report made about internal controls?
Identify and explain the four categories of control procedure.
How might an auditor document his or her understanding of the accounting system?
What effect will the auditor’s preliminary assessment of control risk have on the extent of tests of control?
What is the purpose of tests of control, and what type of audit procedures can be used in undertaking tests of control?
What factors should be considered when the auditor attempts to co-ordinate his or her work with the entity’s internal auditors?
What does the auditor need to consider in determining the nature, timing and extent of tests of control?
Should the auditors comment on the satisfactory review and testing of the accounting and internal control systems in the auditors’ report?
The primary objective of procedures performed to obtain an understanding of the accounting system is to provide auditors with:(a) audit evidence to use in forming an overall opinion on the company.(b) enough understanding to design procedures to gather sufficient audit evidence.(c) enough evidence
As an external auditor, what objectives of internal control are you most interested in?(a) Compliance with applicable laws and regulations.(b) Reliability of financial reporting.(c) Effectiveness and efficiency of operations.(d) All of the above.Choose the best answer.
During consideration of the accounting and internal control systems in a financial statement audit, an auditor is not obligated to:(a) search for significant deficiencies in the operation of the accounting and internal control systems.(b) understand the internal control environment and the
An auditor’s flow chart of an entity’s accounting system is a diagrammatic representation that depicts the auditor’s:(a) programme for tests of control.(b) understanding of the system.(c) understanding of the types of irregularity that are probable, given the present system.(d) documentation
The auditor’s understanding of the accounting system is documented to substantiate:(a) the truth and fairness of the financial statements.(b) adherence to requirements of management.(c) compliance with Auditing Standards.(d) conformity of the accounting records with any applicable Accounting
What would be an appropriate sample of invoices to gain reasonable assurance that all payments are properly authorised as part of the annual audit?(a) Randomly pick one month and select every invoice for that month.(b) Randomly select a sample of 100 invoices from throughout the financial year.(c)
What is the best way for an auditor to obtain evidence about the controls in relation to ‘segregation of duties’?(a) Inspect documents and records to ensure an independent check has been performed.(b) Reperform the task.(c) Observe personnel performing their duties.(d) Discuss the performance
In determining the assessed level of control risk for an entity, an auditor must assess control risk as high when he or she has:(a) found no significant deficiencies in the internal control system.(b) decided on a high level of detection risk.(c) decided not to test the internal control system.(d)
Several categories of control activity are identified in the chapter using the following categorisation:A. Information processing controls:1. General controls 2. Application controls:(a) Proper authorisation(b) Documents and records(c) Independent checks B. Segregation of duties C. Physical
An audit was performed for Daley’s Motors. The evidence for the audit of cash receipts and cash payments was based primarily on testing controls. The audit assistant, as part of his interim control testing, had noted that all bank reconciliations for the year had been reviewed — a good control.
Fabulous Fashion Ltd (FF) runs four private colleges which provide education and training for people in the fashion industry. Its two-year course includes training in design, textiles, manufacture and retail of fashion garments. You are conducting the interim audit for the year ended 30 June 20X1.
What is the difference between preliminary audit strategies and planned substantive procedures?
Why may the auditor specify different detection risks for different substantive tests of the same assertion?
What is the relationship, if any, between analytical procedures and substantive tests of details?
Under what circumstances might an auditor perform substantive procedures prior to the year-end?
What purposes are served by audit programmes?
How does the timing for preparing audit programmes differ, if at all, between an initial and a recurring engagement? Why?
Why would an auditor decide to perform a larger number of tests of details on profit and loss statement accounts?
What is the auditors’ objective in auditing accounting estimates? Indicate the factors to be considered in evaluating the reasonableness of accounting estimates.
Contrast tests of control and substantive procedures.
Which of the following is the only risk that can be manipulated by the auditors?(a) Control risk.(b) Detection risk.(c) Inherent risk.(d) Sampling risk.Choose the best answer
If the acceptable level of detection risk decreases, the assurance directly provided from:(a) substantive procedures should increase.(b) substantive procedures should decrease.(c) tests of control should increase.(d) tests of control should decrease.Choose the best answer
The auditor assesses control risk because it:(a) includes the aspects of non-sampling risk that are controllable.(b) indicates where inherent risk may be the greatest.(c) affects the level of detection risk the auditors may accept.(d) needs to be reported on in the auditors’ report.Choose the
The auditor is more likely to use analytical review as a substantive test when:(a) planned detection risk is high.(b) inherent risk is assessed as high.(c) control risk is assessed as low.(d) planned audit risk is high.Choose the best answer
Which of the following analytical procedures should be applied to the profit and loss statement?(a) Select sales and expense items and trace amounts to related supporting documents.(b) Ascertain that the net profit in the statement of cash flows agrees with the net profit in the profit and loss
As the acceptable level of detection risk decreases, an auditor may change the:(a) assessed level of inherent risk to a lower amount.(b) timing of tests of control by performing them at several dates rather than all at once.(c) mature of substantive procedures, from a less effective to a more
The procedures specifically outlined in an audit programme are primarily designed to:(a) protect the auditor in the event of litigation.(b) detect errors or irregularities.(c) test internal control structures.(d) gather evidence.Choose the best answer
When would tests of details of profit and loss statement accounts be more likely to be required?(a) When control risk is low.(b) When substantial analytical procedures have been performed.(c) When the auditor decides not to test the company’s internal controls.(d) When the analytical procedures
A new audit assistant at the accounting firm of Greentique and Partners was reviewing the planning strategy for her first audit. She could see that there was a very low inherent risk and control risk for the audit. The company had a very good system of internal control in place, and a large amount
Listed below are 15 substantive procedures:1. Perform a debtors’ circularisation.2. Review all invoices received for one month after year-end to ensure they do not relate to the current year.3. Ensure there is an appropriate split between current and non-current liabilities in the leasing note to
Your client is PM Limited (PM), whose main business is maintaining commercial aircraft.PM has contracts with several major airlines to carry out maintenance exclusively on their planes when they are in the UK.Stock items range from screws and wire to more expensive items such as panelling and
Buildwell Manufacturing Company was formed 10 years ago. At that time it took out a 30- year mortgage to purchase land and a factory building that continues to house all of its manufacturing, warehousing and office facilities. It also owns various manufacturing and office equipment acquired at
Define audit sampling. Is selecting all of the items within a population appropriately described as a method of sampling? Explain.
Distinguish between sampling risk and non-sampling risk.
Discuss the ‘risk of over-reliance’ and the potential implications for an audit.
What are the basic similarities and differences between statistical and non-statistical sampling?
What are the benefits to the auditor in using statistical sampling?
Discuss the factors that must be considered in determining sample size.
Define the term ‘tolerable deviation rate’ and discuss the factors that should be considered in deciding on the tolerable rate for both substantive procedures and tests of controls.
Indicate the information that may be used by the auditor to determine the expected population deviation rate.
What are the different methods available for selecting a sample? What method would auditors normally prefer?
When evaluating the results of substantive procedures, should the auditor request management to adjust the financial statements if the sample error exceeds the tolerable error? Discuss.
Discuss the advantages and disadvantages of using monetary unit sampling.
What factors would an auditor normally consider when deciding whether to use statistical or non-statistical sampling?
Which of the following does not constitute sampling?(a) Select all payments made during the year greater than £10,000 and ensure they have supporting documentation.(b) Select 50 purchase orders from all purchases made during the year using a random number table.(c) Randomly pick a number of assets
An advantage of using statistical sampling techniques is that such techniques:(a) mathematically measure risk.(b) eliminate the need for judgemental decisions.(c) define the values of tolerable error and risk of incorrect acceptance required to provide audit satisfaction.(d) have been established
What would most effectively describe the risk of incorrect rejection in terms of substantive audit testing?(a) The auditor has ascertained that the balance is materially correct when in actual fact it is not.(b) The auditor has rejected an item from his or her sample and later found the item was
An advantage in using statistical sampling over non-statistical sampling methods in tests of control is that statistical methods:(a) eliminate the need to use judgement in determining appropriate sample sizes.(b) can more easily convert the sample into a dual-purpose test useful for substantive
If all other factors remained constant, changing the tolerable deviation rate from 10 per cent to 12 per cent would mean:(a) that the sample size would increase.(b) that the sample size would remain the same — there would be no effect on the sample size.(c) that the sample size would decrease.(d)
An underlying feature of random-based selection of items is that each:(a) stratum of the accounting population must be given equal representation in the sample.(b) item in the accounting population must be randomly ordered.(c) item in the accounting population should have an opportunity to be
Which of the following methods of sample selection is the least desirable in terms of extrapolating results to the population?(a) Systematic selection.(b) Random selection.(c) Block selection.(d) Haphazard selection.Choose the best answer.
What audit tests do you think would be most appropriate for monetary unit sampling?(a) To select a sample of debtors to confirm their balances.b) To ensure an appropriate level of management has reviewed all invoices.(c) To select a sample of creditors to circularise.(d) To check that all wages
During the auditing planning of TKD Ltd, a manufacturer of blank video cassettes, the audit team highlighted the matters listed below:1. The audit partner wishes to place greater reliance on the control structure of fixed assets. The audit partner feels the control risk assessment can be decreased
Consider each of the following results from tests of controls performed during an audit.Purchases The auditor used non-statistical sampling techniques to determine an appropriate sample size of 20 in testing a key control over the proper authorisation of purchases. After randomly selecting 20
Wilson and Jones are auditing the 31 December 20X1 inventory of Sparks Ltd, a distributor of electronic parts. They have already performed procedures to satisfy themselves that(1) a computer print-out listing stock at year-end in ascending sequence by stock number and lot number is complete, (2)
You are carrying out the audit of Top Tiles Ltd, a company that manufactures roofing tiles and other ceramic products for the building industry. The head office of Top Tiles is in Bigtown and branches are located in five other towns. You are about to design sampling plans for various audit file
. What are the input devices for a computer accounting system?
Describe the three main computer files used. What are their equivalents in a manual system?
. For each of the three methods of data processing, indicate (1) their essential characteristics and (2) an advantage and a disadvantage.
What are some of the differences between using computers and using a manual system on an entity’s internal controls?
What specific knowledge about computer controls should the auditor acquire in obtaining an understanding?
. What are the three main CAATs used in testing controls? Compare and contrast these techniques.
What is generalised audit software? Identify the four main substantive procedure applications using this software.
What is microcomputer-based audit software? Identify the common applications of this software.
Discuss the main risks associated with EDI systems.
Showing 1700 - 1800
of 2689
First
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Last
Step by Step Answers
Get 50% OFF
Claim Now
