Question

Following is a sample case of the Audit Risk Model: (Remember RMM = IR X CR) AR= RMM X DR .05 50 X 10 For this case, explain whether there will be a lot of substantive Testing or only a modest amount able. The Securities and Exchange Commission determined that Sunbeam's bill and hold sales did not meet existing rules for Revenue Recognition. Explain what the SEC's position was: A part-time accounts payable clerk who believes he produces more work than higher paid full time employees and uses this as a justification for stealing from his employer is an example of which fraud risk factor?

need all the answers

Answer 1

Audit Risk: is is a furch a Audit Risk function of the Risk of material Misstatement & Detection och [RM] Risk. Risk of material Mistramut - Assertion level < Interest Risk financial Statement level (cry conino Risk Audit Risk = RMM & DR [Detection Risk and on Identified misstatement, Resporny to RMM will be explained belo Responses to Allessed RMM: - Compliance Substantive procedury Procedury Testob details a balances, Test of controls Compliance procediny: - operating Effectiveny of Internal conhol Timing of Test of controls wring undit evidence obtained during Interim Period. & Previon wing & conud over significant Risk. Ps Audith

Substantive procedun i Design Perform substantive Procedure. in Aggreing (61) reconciling the financial statients with underliving acconting Records in) Examing Material Journal Entries. SECS. Rule for Revene Recognition To meet the the reveme has set forth Cretenia recognise to be met in order to Reveme: 1) Risk of wherslip must have paid to the buyer (1) customes must have made fixed committent to purchan the goodle in writing. Dette Tii) the Buyes, must request the request transaction Bill & hold Bans iv) there will fixed schedule for delivery of goods V sellen myt have not retained any specific Perfomence. 6i) oldered goods must haven beeno from sellers Inverton o segregated n segregated from sex

o time acconfant Payable cleve who belives he produces mole wolle higher paid full time Empbyce and use this as Justification for stealing from his employer. a the above Fraud Risk factor clean examble of Altitude & Ratont Rationalisations, leads (FRF) Mis appropriation of Assets Behavion Indicating displeasure (s) dissatisfaction with the Entity (6) its tremut of the Employee FRF Relating to misstatement Rusulting from Mis appropriation of Assets,