Auditing Theory And Practice 1st Edition Karen Van Peursem - Solutions

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SYSTEM OR COMPUTER FRAUD:Required: Describe a control that could prevent each of the following frauds from occurring:a A data-entry clerk enters a ‘selling price’ for a product that exceeds the price and allocates the difference to a personal account.b A programmer takes the stock system
FRAUD AUDIT METHODS: Choosing from the list provided here, what would you classify as the five most useful, and five least useful, methods for detecting warehousing fraud?a Account for items in transit, compare counts with stock records and reconcile differences.b Compare classification (WIP, raw
PROACTIVE AND REACTIVE FRAUD: Belle is a bookkeeper for PromoType, a small business in which the owner, Cheryl, creates and sells marketing plans. Belle records and processes all accounts. The business has no cash sales – customers deposit payments directly into PromoType’s bank account.
FRAUD IDENTIFICATION: Below is a list of events carried out in OurBusiness.Required: Identify which of them, if any, are ‘fraudulent’ events and which are not. Why or why not?a sale of fictitious assets b related party transactions, which are conducted at arm’s-length c kickbacks d concealing
EMPLOYEE VS MANAGEMENT FRAUD: Fraud designed to benefit the organisation generally also benefits the employee, and fraud perpetrated to the detriment of the organisation usually deceives an outside party as well.Required: Provide one possible example of each of these two situations.
SUSPICIONS OF FRAUD: The auditor wanted to verify $450 000 in renovations to an old medical clinic building. While normally procedures would be limited to document checks, the auditor visited the site and observed a brand-new medical building.a What seems odd here?b What do you suspect?c How would
COLLUSION AND INDICATOR ALERTS: Office supply brokers conspired with the stock manager of Company X. Ordered merchandise was not delivered, but the stock manager would issue false receiving reports and thereby authorise payment. The stock manager left the company before the end-of-year stocktake.
REACTIVE FRAUD:Required: Decide what you would do next in a fraud investigation should any of the following occur. Treat each situation independently of the others:a The fraud investigation reveals no indicia of fraud.b Evidence is obtained demonstrating an instance of employee theft.c Evidence is
PROACTIVE FRAUD:Required: Decide what you would do next in a fraud investigation should any of the following occur. Treat each situation independently of the others:a A bank-to-cash reconciliation reveals no indicia of fraud.b There is no segregation of duties between the development of a system
FRAUD DILEMMAS (EXTERNAL FS AUDITOR): Auditors discovered, through following up SpAR procedures, that $8 million in stock was misappropriated. Senior management carried out the fraud by inappropriately authorising write-offs for‘damaged’ stock that was actually unsold. Auditors required an
Identify fraud legislation in Australia or New Zealand and detail what type of fraud it may prevent, detect or discourage through sanction.
Name and describe how sampling in a proactive fraud situation would be distinct.Discuss both sampling methods and decisions.
Describe the difference between a proactive and a reactive fraud investigation.a Under what circumstances might you use one over the other?b How would the ‘stop rule’ differ for each type of approach?
Name some reasonable responses to the discovery of fraud and why they may be reasonable under different circumstances.
Distinguish between the responsibilities of the auditor in the:a statutory financial statement audit b fraud audit c forensic audit.
Name six different indicators of fraud.
Describe the four steps in a money-laundering scheme.
Can a statutory financial statement auditor fail to find fraud and still conduct a nonnegligent audit? How?
Describe the (statutory) auditor’s responsibility to identify fraud in the conduct of a financial statement audit.
Can a manager commit management fraud that does not involve direct theft? What would it be, and how?
Name and describe different types of management fraud.
Name four means by which outsiders may gain unauthorised access to an organisation’s computer information system.
Why should the professional auditor/accountant be concerned with ‘money laundering’? What are their responsibilities regarding discovering and/or reporting it?
Name and define the six different types of fraud.
describe Australia/New Zealand’s fraud audit regulatory environment.
explain the purpose and process of fraud audits
explain incentives for committing fraud and describe fraud indicators
define fraud and explain the types of fraud
SUSTAINABILITY – RIGHTS AND OBLIGATIONS:i In carrying out a financial engagement, the auditor suspects that the company is emitting super-heated water into the local water system. There is no specific law or regulation in New Zealand referring to super-heated water, although studies overseas
PUBLIC SECTOR – ASSURANCE: Can you come to a high level of assurance on the:a effectiveness of policy set by the Reserve Bank b equity of hospital services distribution to rural and urban patients c stewardship of native flora and fauna, bush tracks and huts In addition:d How can a diverse public
PUBLIC SECTOR – SCOPE: Name a circumstance in the case of local (or district)council whether the audit should be for:a the whole council b only a part c the council and the advisory (or equivalent) board together.In addition, what do you think are the assurance issues related to local (or
PUBLIC SECTOR – ACCOUNTABILITY:a Should the opinion on an investigative audit by the government auditor be publicly available:i for an individual ii for a private estate agency business iii for a local authority?b Should local council audits be contracted out to the lowest bidder for:i financial
PUBLIC SECTOR: In terms of the public sector’s interventionist role, and considering the six categories, where would you classify each of the following organisations as audit clients?a cemetery boards b Australian National Audit Office (ANAO)c Customs and Immigration d Earthquake and War Damage
Ethics and environmental audit: Name the characteristics that Blumenfeld(1989) says should influence the disclosure, or non-disclosure, of an environmental issue.
Name one example each of a report compiled by (a) internals for externals; (b)externals for internals; (c) internals for internals and (d) externals for externals.
Explain why environmental audits may be described as ‘compliance’ audits.
Identify three unique audit risks to Small and Medium Enterprises (SMEs).
How are non-profit charities different from other entities with respect to ‘employees/volunteers’ and ‘tax treatments’?
Describe challenges for the auditor in group (consolidated) account engagements.
When and how is the consolidated financial statement ‘put together’?
Describe the differences between ‘economy’, ‘efficiency’ and ‘effectiveness’ with respect to the Value for Money (VFM) government audit.
Name and describe three key pieces of legislation over your nation’s public sector audit.
Compare and contrast the ‘segmented’ and ‘integrated’ models of public audit delivery.
Identify five possible outcomes from public sector entity intervention in the market.
How do the audit conceptual framework ‘concepts’ apply to this sector?
How are non-commercial entities fundamentally different from commercial entities?
What primary characteristic do non-profit entities have in common?
describe the nature, purpose and regulatory environment of environmental audits.
identify the distinguishing features of non-profit, charitable and small business audits
describe the unique requirements of a consolidated accounts audit
describe the purpose of, and conceptual applications to, public sector audit
VIRTUAL SYSTEMS: Use the payroll example in this chapter to:a classify each element within the framework (Figure 18.7)b distinguish issues of concern to the external financial auditor from those of interest to management c for the vulnerabilities identified, describe controls that could protect
INTERNAL AUDITOR ROLE: Review the case set out in this chapter on WorldCom, then investigate it further (online). Discuss the following implications for the internal auditor:a What was the nature of the fraud? What type of transactions caused it, and who authorised those transactions?b What could
PROFESSIONS: In terms of Burns, Greenspan and Hartwell’s (1994) professional (a)‘mystique’ and (b) ‘cruciality’, rank each of the following on a scale of 1 (high) to 3(low), and explain why and/or under what conditions. What is the most important ethical issue for a member in each of
INTERNAL AUDIT: For each statement below from the IIA, identify both the ‘pros’and ‘cons’ of these policies for their employer, for society or even for themselves.a The IIA believes that the internal auditor should actively seek out indicators of fraud representations.b Per the IIA,
INTERNAL VS EXTERNAL AUDIT: Evaluate the implications for the external financial statement auditor of the findings listed in Exercise 18.2.
INTERNAL AUDIT AND FRAUD: Evaluate implications for the internal auditor of each of the following ‘findings’ made by a major accounting firm:a Approximately 50 per cent of organisations experience intrusions into their internal systems, most from outside hackers.b More than half of all security
PROFESSIONS: Answer each of the following:a Describe how the Burns, Greenspan and Hartwell (1994) model of intimidation is different to the ‘list’ model. Identify why one model may have more credibility than the other. Explain your reasoning.b Identify a professional association to which you
Identify two risks related to an audit of cloud-based or virtualisation systems.
Explain the purpose of the system framework shown in Figure 18.7.
Identify twelve system control or testing vulnerabilities present in a virtual IT system.
Define the following IT terms:a platform b server c network d virtualisation e interface.
Name internal auditor characteristics that may help the external auditor to rely on them.
Use seven points to explain the relationship between the ‘external’ and ‘internal’auditors.
From what or whom should the internal auditor be independent? Why?
Describe the internal auditor role and six usual functions in current times.
Name the sources of (a) COSO and (b) the Sarbanes-Oxley Act 2002 and why they are relevant to internal audit in Australia and New Zealand.
What are the procedures used in an internal auditor’s systems testing process?
Define the transformation model and what it describes.
Describe the purpose and elements of the Burns, Greenspan and Hartwell (1994)intimidation model of professionalism.
COMPLETION AND AUDIT REPORT: The financial statements for the period ending 31 March 2023 for Agris Ltd, a New Zealand company, are being audited by Bongart &Bongart CAs. Bongart is the audit partner in charge. Alan is Agris’s CEO.Required: For each situation (i)–(iii):a name the issue of
COMPLETION AND AUDIT REPORT: The financial statements for the period ending 31 March 2022 for Agris Ltd, a New Zealand company, are being audited by Bongart &Bongart CAs. Bongart is the audit partner in charge. Alan is Agris’s CEO.Required: For each situation (i)–(iii):a name the type of
OPINION AND GOING CONCERN: Your audit firm ranks each going concern issue on a scale of 1 (low concern) to 3 (high concern) on a number of matters.You are auditing a wholesale distributor of locks, safes, alarms and other security devices. Assume that industry patterns show a recent, significant
AUDIT REPORT: The financial report gives a true and fair view, except that debtor records were destroyed in a flood. The possible effect of this is material but not fundamental. Write an appropriate audit report.
OPINION AND CASE LAW: If an auditor gives an unqualified opinion on a company’s financial statements and that company goes into liquidation six months later, the auditor might face an action for negligence. Explain:a to whom auditors owe a ‘duty of care’b the significance of the following
AUDIT OPINION: What types of audit opinion would you expect to see in the following circumstances and why? Consider each independently.a A takeover bid could have a major effect on the company’s share price. This is disclosed in the footnotes to the financial statements.b Same as (a), but this is
AUDIT OPINION: What type of audit opinion would you expect to see in the following circumstances and why? Consider each independently.a Inventory was valued at higher of cost or market, which is not a true and fair representation.b A payroll fraud was discovered, but the amount was immaterial and
EMPHASIS OF MATTER AND KAMs Required: For each of the circumstances below, suggest whether the item would be more likely shown as either an ‘Emphasis of matter’ or a KAM. Consider each situation independently.a A subsequent event occurs that is so material that the reader should be made aware
EMPHASIS OF MATTER: Your junior audit staff member cannot decide whether the following matters should lead to a ‘qualification’ of the opinion or an ‘Emphasis of matter’. What do you think? Treat each independently of the other.a The potential for company failure within six months of the
AUDIT REPORT: Your experienced audit senior prefers the ‘short-form’ report, which does not include information about the ‘Basis for the opinion’ or the ‘Auditor’s responsibilities’.Required: Explain to the auditor the purpose of these sections and how they may help reduce the
Identify other assurance standards and their purpose, as currently promulgated.
Define the circumstances under which the following opinion may be given for a going concern problem:a ‘Emphasis of matter’ only b adverse opinion c disclaimer.
Name two different types of ‘uncertainties’ as defined for the audit report.
When should an ‘adverse’ opinion be issued?
When should a ‘disclaimer’ be issued?
When should a ‘modification due to disagreement’ be issued?
When should a ‘modification due to a limitation in scope’ be issued?
What is the difference between a ‘material’ qualification and a ‘material and pervasive’qualification?
Define ‘disagreement’ as the basis for a modification.
Define a ‘limitation of scope’.
Why is it important to convey the ‘report date’ in the audit report?
Define ‘Emphasis of matter’, provide an example, and answer the question of whether its presence modifies the audit opinion or not.
Provide an example of a key audit matter, and answer the question of whether its presence modifies the audit opinion or not.
How may professional and philosophical scepticism apply to the audit communication with the client?
Name and define five types of audit communication (other than the audit report) and whether they are formal or not.
Name and define the eight sections of the standard audit report.
What does it mean to say that report language is ‘symbolic’?
What characteristics should good ‘communication’ have?
Why is audit opinion important?
What is the purpose of the audit report?

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Auditing Theory And Practice 1st Edition Karen Van Peursem - Solutions

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