CORRECT THE SENTENCE IF IT'S FALSE During the course of assessing internal control, the auditor interviews the
Question:
CORRECT THE SENTENCE IF IT'S FALSE
During the course of assessing internal control, the auditor interviews the CFO, who informally explains to the auditor that the Board of Directors receives monthly financial statements.
In understanding a client, and its internal control, it may be necessary to design tests of internal controls and substantive procedures.
When an auditor determines that the accounts receivable clerk at a company has computer access to the company’s accounts payable system, this is a problem with the accounting information system.
A client has substantial investments in marketable securities and keeps the stock certificates in the company vault for safekeeping. The CFO of the company prepares a schedule listing the securities with their cost and current market price. To verify the existence of the securities, you can confirm this by calling the brokerage firm that sold the securities to your client.
During the preparation of a bank reconciliation, you notice a debit on the bank statement for $1,000. The description lists it as a “miscellaneous charge”. You complete the bank reconciliation and the bank and book balances agree, so you accept this audit evidence because of the “completeness” of the cash account.
During the audit of a company, you decide to only spend a limited amount of time reviewing the petty cash box since a balance of only $250.00 is supposed to be in the box at any one time. When you inspect the transactions related to the petty cash box, you see four receipts handwritten by the bookkeeper each for $250. They are all receipts with the CEO’s name on each receipt indicating a reimbursement for business lunches with potential customers. This is evidence of the accuracy of petty cash, and accept the balances for the audited report.
In testing the internal controls for cash, an auditor relies solely on the preparation and review of bank reconciliations. During the preparation of bank reconciliation, she notices that the numbered checks are out of sequence. After, looking for the missing checks, they cannot be found. During the investigation, the bookkeeper informs the auditor that the missing checks were voided and discarded. Since the book and bank balances agree, the auditor needs to do nothing else.
Sun Global Corp., is an international company that trades heavily with the country of Lebanon. After the books and records close for the fiscal year, but before issuing the auditor’s report, you learn that Lebanon’s currency has fallen 75% due to a major fraud within the Central Bank of Lebanon. So based on AICPA rules, you decide under the concept of conservatism to record a loss due to foreign currency transactions.
An auditor meets with a client to discuss the allowance for product warranties. The client estimates that an allowance for 2% of product sales will be a sufficient liability to record on the balance sheet. The auditor ought to include this matter in his letter of inquiry to the company’s law firm.
Sam and Dave issued an unqualified opinion in the financial statements of G Corp. on April 30, 2019, for the last calendar year. They know that North Star Bank is considering funding a mortgage for the G Corp. based on their audited financial statements. On June 30, 2019, they read in the newspapers that Mary Wells, the full-charge bookkeeper, was arrested for forgery and embezzlement of G Corp. cash. The purported amount stolen was $12,000. They now realize that $1,000 a month during the period audited must have been stolen from the petty cash box. The proper procedure for Sam and Dave to follow is to immediately contact Mary Wells, and demand that she return the stolen funds.
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley