Communications among audit team members Essay Case Assignment

Communications among audit team members Essay Case Assignment

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Communications among audit team members Essay Case Assignment

Write a 500 word, five-paragraph comparison-contrast essay on one of the assigned topics. Follow all the rules of MLA essays and make sure your essay is organized and developed properly.

Topics (choose one):

Contrast yourself with a sibling. Do NOT state the obvious (we are both girls, we have the same parents, we both have brown eyes, etc.). Focus on what makes you different despite the fact that you were raised similiarly.

Contrast two family members of the same “position” (two grandmothers, two aunts, two uncles, two cousins, etc.)

Contrast two coaches, teachers, classes

Compare two jobs you have held

Compare two relationships (friendships, people you have dated, mentorship, etc.)

Contrast two places you have lived (the physical places, area of the world, rural vs. urban, with roommates vs. by yourself)  Make sure to use MLA format (see sample on pages 488-496 of the Little, Brown Handbook). Unlike the sample, your essay should NOT contain research, but should have plenty of support from your life experiences. Make sure the heading and page numbering are correct as well as the indentations and spacing.

Home>Business & Finance homework help>Accounting homework help>Due in 4 hours, experts needed.

1

ACCT 422 – Auditing Theory and Practice

Exam #2

Due: 4 hours after the Private Message containing the Exam is opened

and no later than Sunday, February 23, 2014 at 11:00 p.m. EST

Instructions: You have four (4) hours to complete and submit this Exam in your assignment

folder. This is an open book, open notes Exam, however you should work independently. This

Exam consists of 4 parts and 65 questions. Your answers to the Exam should be submitted on a

separate answer sheet. Your answer sheet should be submitted as an attachment in your

assignment folder under the “Exam 2” folder in Microsoft Word, WordPerfect or PDF format.

Please write your name on your answer sheet. Please do not write your answers directly in

the narrative portion of your assignment folder.

Part 1: (worth total of 64 points)

For Part 1, please number your answer sheet from 1 to 40 and provide the letter corresponding to

the best answer (eg, 1. A, 2. B, etc.).

1.

Which of the following is not a likely source of information to assess fraud

risks?

Communications among audit team members

Inquiries of management

Analytical procedures

Consideration of fraud risks discovered during recent audits of other clients

2.

Which of the following audit tests is usually the least costly to perform?

Analytical procedures

Tests of controls

Tests of balances

Substantive tests of transactions

3.

When should auditors not perform alternative procedures in testing the accounts

receivable balance?

When customers do not return positive confirmation requests

When customers do not return negative confirmation requests

When confirmations are deemed to be ineffective as an audit procedure

When confirmations are too costly to use

2

4.

To test for recorded sales for which there were no actual shipments, the auditor

vouches from the:

bill of lading to the sales journal.

sales journal to the shipping documents.

sales journal to the accounts receivable subsidiary ledger.

bill of lading to the supporting customer order and sales order.

5.

Misstatements in the financial statement may not be detected with the increased

use of IT due to:

the loss of a visible audit trail.

reduced human involvement.

I only

II only

both I and II

neither I or II

6.

When assessing whether the financial statements are auditable, the auditor must

consider:

that the integrity of management and the adequacy of accounting records are

the two primary factors determining auditability.

1. that the integrity of management and the adequacy of risk management are

the two primary factors determining auditability.

1. that if all of the transaction information is available only in electronic form

without a visible audit trail, the company cannot be audited.

1. the control risk before determining if the entity is auditable.

7.

Which of the following is most correct with respect to the use of analytical

procedures?

Analytical procedures may be used in evaluating balances in the testing

phase as long as the auditor also uses them in assessing the going concern

assumption.

1. Analytical procedures must be used throughout the audit.
2. Analytical procedures used in the testing phase of the audit are primarily

used to direct an auditor’s attention so that the auditor’s understanding of the

business is improved.

1. Analytical procedures are performed by studying plausible relationships

between financial and nonfinancial data.

3

8.

The most reliable evidence from confirmations is obtained when they are sent:

as close to the balance sheet date as possible.

at various times throughout the year to different segments of the sample, so

that the entire sample is representative of account balances scattered

throughout the year.

1. several months before the year-end, so the auditor will have adequate time

to perform alternate procedures if they are required.

1. at various times throughout the year to the same group in the sample, so that

the sample will not have a time bias.

9.

Prenumbered documents will only be useful for control purposes if:

a different numerical sequence is used for each company.

the sequence is accounted for periodically.

employees are allowed to use documents out of numerical sequence.

the same numerical sequence is used each accounting period.

10.

Which audit tests involve physical examination and confirmation?

Tests of controls

Tests of transactions

Tests of balances

Analytical procedures

11.

Controls that are designed for each software application and are intended to

help a company satisfy the transaction-related audit objectives are:

user controls.

general controls.

audit controls.

application controls.

12.

Which of the following parties is responsible for implementing internal controls

to minimize the likelihood of fraud?

External auditors

Audit committee members

Management

Committee of Sponsoring Organizations

4

13.

When determining what type of report to issue on internal control under Section

404:

an adverse opinion on internal control must be given if any weaknesses in a

key internal control is discovered.

1. a scope limitation requires the auditor to disclaim an opinion on internal

controls.

1. if the auditor gives a qualified opinion on the financial statements, they must

give a qualified opinion on internal controls.

1. a scope limitation requires the auditor to express a qualified opinion or a

disclaimer of opinion on internal controls.

14.

Inherent risk is ________ related to detection risk and ________ related to the

amount of audit evidence.

directly, inversely

directly, directly

inversely, inversely

inversely, directly

15.

Which is a liquidity activity ratio?

Profit margin

Inventory turnover

Return on assets

Times interest earned

16.

If an auditor believes the chance of financial failure is high and there is a

corresponding increase in business risk for the auditor, acceptable audit risk

would likely:

be reduced.

be increased.

remain the same.

be calculated using a computerized statistical package.

17.

Which of the following may represent the biggest challenge smaller public

companies face in implementing effective internal control?

A lack of expertise

Reduced importance

Limited resources

Limited available guidance

5

18.

Auditing standards specifically require auditors to identify ________ as a fraud

risk in most audits.

overstated assets

understated liabilities

improper revenue recognition

overstated expenses

19.

Which of the following statements is correct regarding the costs involved in

obtaining evidence?

A.

Physical examination is usually the

least expensive type of audit

evidence

Cost of obtaining evidence may be a

factor in deciding whether to

obtain that evidence

Yes Yes

B.

Physical examination is usually the

least expensive type of audit

evidence

Cost of obtaining evidence may be a

factor in deciding whether to

obtain that evidence

No No

C.

Physical examination is usually the

least expensive type of audit

evidence

Cost of obtaining evidence may be a

factor in deciding whether to

obtain that evidence

Yes No

D.

Physical examination is usually the

least expensive type of audit

evidence

Cost of obtaining evidence may be a

factor in deciding whether to

obtain that evidence

No Yes

20.

Which of the following audit tests would be regarded as a test of controls?

Comparison of the inventory pricing to vendors’ invoices

Tests of the signatures on canceled checks to board of directors’

authorizations

1. Tests of the additions to property, plant, and equipment by physical

inspections

1. Review of the specific items making up the balance in a given general

ledger account

6

21.

Two determinants of the persuasiveness of evidence are:

competence and sufficiency.

relevance and reliability.

appropriateness and sufficiency.

independence and effectiveness.

22.

When setting a preliminary judgment about materiality:

more evidence is required for a low dollar amount than for a high dollar

amount.

1. less evidence is required for a low dollar amount than for a high dollar

amount.

1. the same amount of evidence is required for either low or high dollar

amounts.

1. there is no relationship between it and the dollar amount of evidence

needed.

23.

Misappropriation of assets is normally perpetrated by:

members of the board of directors.

employees at lower levels of the organization.

management of the company.

the internal auditors.

24.

Which of the following statements is not true?

Analytical procedures emphasize the overall reasonableness of transactions

and balances.

1. Tests of controls are concerned with evaluating whether controls are

sufficiently effective to justify reducing control risk and thereby reducing

analytical review procedures.

1. Substantive tests of transactions emphasize the verification of transactions

recorded in the journals and then posted in the general ledger.

1. Tests of details of balances emphasize the ending balances in the general

ledger.

25.

Sales should be recorded, at the earliest, when:

the order is received.

the order is received and credit is approved.

credit is approved and it is verified that there is enough inventory to fill the

order.

1. the shipment takes place.

7

26.

Which of the following is not a general control?

Computer performed validation tests of input accuracy.

Equipment failure causes error messages on monitor.

There is a separation of duties between programmer and operators.

There are adequate program run instructions for operating the computer.

27.

The auditors primary purpose in auditing the client’s system of internal control

over financial reporting is:

to prevent fraudulent financial statements from being issued to the public.

to evaluate the effectiveness of the company’s internal controls over all

relevant assertions in the financial statements.

1. to report to management that the internal controls are effective in preventing

misstatements from appearing on the financial statements.

1. to efficiently conduct the Audit of Financial Statements.

28.

The predecessor auditor is required to respond to the request of the successor

auditor for information, but the response can be limited to stating that no

information will be provided when:

the predecessor auditor has poor relations with the successor auditor.

the client is dissatisfied with the predecessor’s work.

there are actual or potential legal problems between the client and the

predecessor.

1. the predecessor believes that the client lacks integrity.

29.

Which of the following statements is not correct?

It is possible to vary the sample size from one unit to 100% of the items in

the population.

1. The decision of how many items to test should not be influenced by the

increased costs of performing the additional tests.

1. The decision of how many items to test must be made by the auditor for

each audit procedure.

1. The sample size for any given procedure is likely to vary from audit to

audit.

30.

An auditor is performing a credit analysis of customers with balances over 60

days due. She is most likely obtaining evidence for which audit related

objective?

Realizable value

Existence

Completeness

Occurrence

8

31.

An auditor who accepts an audit engagement and does not possess the industry

expertise of the business entity should:

engage financial experts familiar with the nature of the business entity.

obtain a knowledge of matters that relate to the nature of the entity’s

business.

1. refer a substantial portion of the audit to another CPA who will act as the

principal auditor.

1. first inform management that an unqualified opinion cannot be issued.

32.

When designing audit procedures, tracing of source documents to the

customer’s subsidiary ledger and subsequently to the general ledger is done to

satisfy what assertion?

Valuation

Cutoff

Completeness

Classification

33.

When allocating materiality, most practitioners choose to allocate to:

the income statement accounts because they are more important.

the balance sheet accounts because most audits focus on the balance sheet.

both balance sheet and income statement accounts because there could be

errors on either.

1. all of the financial statements because it is required by GAAS.

34.

When controls are deemed ineffective and assessed control risk is at the

maximum for a private company, which of the following would normally be

true?

No emphasis is placed on the controls.

Relatively little emphasis is placed on the controls.

Moderate emphasis is placed on the controls.

Heavy emphasis is placed on the controls.

35.

Proper segregation of functional responsibilities calls for separation of:

authorization, execution, and payment.

authorization, recording, and custody.

custody, execution, and reporting.

authorization, payment, and recording.

9

36.

A customer mails and records a check to a client for payment of an unpaid

account on December 30. The client receives and records the amount on

January 2. The records of the two organizations will be different on December

This represents:

A.

A cutoff misstatement A timing difference

Yes Yes

B.

A cutoff misstatement A timing difference

No No

C.

A cutoff misstatement A timing difference

Yes No

D.

A cutoff misstatement A timing difference

No Yes

37.

The most important output control is:

distribution control, which assures that only authorized personnel receive

the reports generated by the system.

1. review of data for reasonableness by someone who knows what the output

should look like.

1. control totals, which are used to verify that the computer’s results are

correct.

1. logic tests, which verify that no mistakes were made in processing.

38.

Which of the following is not a factor that relates to opportunities to commit

fraudulent financial reporting?

Lack of controls related to the calculation and approval of accounting

estimates

1. Ineffective oversight of financial reporting by the board of directors
2. Management’s practice of making overly aggressive forecasts
3. High turnover of accounting, internal audit, and information technology

staff

10

39.

You are auditing the company’s purchasing process for goods and services. You

are primarily concerned with the company not recording all purchase

transactions. Which audit procedure below would be the most effective audit

procedure in this case?

Vouching from the accounts payable account to the vendor invoices

Tracing vendor invoices to recorded amounts in the accounts payable

account

1. Confirmation accounts payable recorded amounts
2. Reconciling the accounts payable subsidiary ledger to the accounts payable

account

40.

Based on audit evidence gathered and evaluated, an auditor decides to increase

the assessed level of control risk from that originally planned. To achieve an

overall audit risk level that is substantially the same as the planned audit risk

level, the auditor would:

increase materiality levels.

decrease detection risk.

decrease substantive testing.

increase inherent risk.

Part 2: (worth total of 16 points)

For Part 2, please number your answer sheet from 41 to 50 and provide the letter corresponding

to the best answer (eg, 41. A, 42. B, etc.).

41. It is common to use a combination of positive and negative confirmations by

sending the latter to accounts with large balances and the former to those with

small balances.

True

False

42. The two most important factors when determining the appropriate sample size

in an audit are the auditor’s expectation of misstatements and the objectivity of

the evidence.

True

False

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43. Violations of the existence objective for sales are of greater concern to the

auditor than violations of the completeness objective.

True

False

44. An engagement letter establishes a clear understanding of the terms of the

engagement between the client and the auditor, but it is optional for private

companies.

True

False

45. Most practitioners allocate the preliminary judgment about materiality to both

the balance sheet and income statement accounts.

True

False

46. The auditor’s understanding of internal control performed as part of risk

assessment procedures provides the basis for the auditor’s initial assessment of

control risk.

True

False

47. In IT systems, if general controls are effective, it increases the auditor’s ability

to rely on application controls to reduce control risk.

True

False

48. An ineffective board of director oversight over financial reporting is an example

of an incentives/pressures risk factor.

True

False

49. Control risk is generally set at minimum for most private companies.

True

False

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50. Recording a sale that did not occur violates the occurrence transaction-related

audit objective and the existence balance-related audit objective.

True

False

Part 3: (worth total of 10 points)

For Part 3, please number your answer sheet from 51 to 60 and provide the letter corresponding

to the best answer (eg, 51. A, 52. B, etc.).

Below are 10 audit procedures. Classify each audit procedure using one of the following types

of audit evidence: (A) physical examination, (B) confirmation, (C) documentation, (D)

observation, (E) inquiry of the client, (F) reperformance, (G) recalculation, and (H) analytical

procedure.

Type of

Evidence Audit Procedures

51. Review the total of repairs and maintenance for each month to determine

whether any month’s total was unusually large.

52. Compare vendor names and amounts on purchases invoices with entries in

the purchases journal.

53. Foot entries in the sales journal to determine whether they were correctly

totaled by the client.

54. Make a surprise count of petty cash to verify that the amount of the petty

cash fund is intact.

55. Obtain a written statement from the client’s bank stating the client’s year-

end balance on deposit.

56. Watch client employees count inventory to determine whether company

procedures are being followed.

57. Count inventory items and record the amount in the audit files.
58. Calculate the ratio of cost of goods sold to sales as a test of overall

reasonableness of gross margin relative to the preceding year.

59. Obtain information about the client’s internal controls by asking questions

of client personnel.

60. Examine a piece of equipment to make sure a recent purchase of equipment

was actually received and is in operation.

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Part 4: (worth total of 10 points)

Below are five audit procedures, all of which are tests of transactions associated with the

audit of the sales and collection cycle. Also below are the six general transaction-related

audit objectives and the five management assertions. For each audit procedure, indicate

its audit objective, and (2) the management assertion being tested.

Audit Objectives Assertions

Occurrence V. Occurrence

Completeness W. Completeness

Accuracy X. Accuracy

Posting and summarization Y. Classification

Classification Z. Cutoff

Timing

61. Account for the sequence of prenumbered bills of lading and sales invoices.

.

.

62. Trace from a sample of prelistings of cash receipts to the cash receipts journal,

testing for names, amounts, and dates.

.

.

63. Examine customer order forms for credit approval by the credit manager.

.

.

64. Vouch recorded sales from the sales journal to the file of bills of lading.

.

.

65. Compare dates on the bill of lading, sales invoices, and sales journal to test for

delays in recording sales transactions.

.

.Communications among audit team members Essay Case Assignment

RUBRIC QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points:  Student failed to submit the final paper. 20 points out of 50:  The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50:  The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately.  Elements of the required response may also be lacking. 40 points out of 50:  The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples.  The answer is complete. 50 points:  The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples.  No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points:  Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points:  Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points:  References to scholarly sources are occasionally given; many statements seem unsubstantiated.  Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points:  Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented.  APA 6th Edition is used with only a few minor errors.  There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points:  Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented.  APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points:  Student failed to submit the final paper. 5 points out of 20:  The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors  10 points out 20:  The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20:  The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points:  The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points:  Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements.  The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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