Control Risk - Materiality - Confirmation - Vouching - Tracing - SHORT ANSWER 1. List the...
Review Garcia and Foster’s calculations of materiality thresholds for the 20X2 Audit . Determine if the auditors correctly applied the materiality concept in their risk assessment procedures. Describe any problems you find and provide suggestions for improvement. This question relates to step 2 of the Garcia and Foster Audit Plan. Step 2: Requires the audit team to obtain and document its understanding of the client’s environment including internal controls. This understanding allows auditors to identify significant risks in the audit...
Audit Risk Model. Audit risks for particular accounts and disclosures can be conceptualized in the model: Audit risk (AR) Inherent risk (IR) x Control risk (CR) x Detection risk (DR). Use this model as a framework for considering the following situations and deciding whether the auditor's conclusion is appropriate. a. Paul, CPA, has participated in the audit of Tordik Cheese Company for five years, first as an assistant accountant and the last two years as the senior accountant. Paul has...
1. Consider the following statements: I. Per COSO, Control Activities are the policies and procedures that help insure that management’s directives are carried out. II. A Reliance Strategy is used when control risk is considered High. a. I is true; II is true b. I is true; II is false c. I is false; II is true d. I is false; II is false 2. Management's attitude toward aggressive financial reporting and its...
2019 Audit of Beta Industries: Summary Information Assume you are an audit manager, today is May 15, 2019, and your public accounting firm is currently planning the 2019 financial statement audit of Beta Home Goods, a retailer in the home goods and supply industry. Beta is a public company with a 12/31 year-end, and a new client for your firm. The audit partner has asked you to help plan the audit for this new client using the following information obtained...
1. Consider the following statements: I. Lapping involves covering a theft related to accounts receivable by using a later cash receipt to cover the previous theft. II. A “positive confirmation” requests that customers respond whether they agree or not with the amount due to the entity stated in the confirmation. a. I is true; II is true b. I is true; II is false c. I is false; II is true d....
Multiple Choice: (30pts) _______ 1-The profession’s ethical standards would most likely be considered to have been violated when a CPA: Continued an audit engagement after the commencement of litigation against the CPA alleging excessive fees filed in a stockholder’s derivative action Represented to a potential client that the CPA’s fees were substantially lower than the fees charged by another CPA’s for comparable services. Issued a report on a financial forecast that omitted a caution regarding achievability. Accepted a consultation...