A
Introduction: Auditing is a systematic process wherein the auditor investigates the financial statements, data, information and other records to determine whether the financial statements show the true and fair position of the firm or not.
To explain: Phases of an audit.
B
Introduction:
To explain:Audit procedure involving test of controls can provide an indirect evidence about financial statements being free from material misstatements.
C
Introduction: Internal control is the system of accounting and auditing policies followed by a particular entity.
To explain:Work conducted by auditors in understanding internal control.
Want to see the full answer?
Check out a sample textbook solutionChapter 1 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
- You have been employed Arens & Elder CPA for many years. As a training officer for the firm, part of your responsibility include training new staff before they are sent out on an initial audit job. Three new members of staff are expected to work on the audit of Flemings Limited. Your training of these new staff members will focus on management assertions and audit procedures. The following are various management assertions (1 through 10), made by Flemings, that are related to their sales and accounts receivable. i. All sales transactions have been recorded. ii. Receivables are appropriately classified as to trade and other receivables in the financial statements and are clearly described. iii. Accounts receivable are recorded at the correct amounts. iv. Sales transactions have been recorded in the proper period. v. Sales transactions have been recorded in the appropriate accounts. vi. All required disclosures about sales and receivables have been made. vii. All…arrow_forwardSaleha was recently hired by the accounting firm of Haron & Associates. After two weeks of joining the firm, Saleha was sent to the first-year staff training course.The instructor asked her to prepare answers for the following questions:a. How does evidence relate to assertions and to the audit report?b. What are the characteristics of evidence should an auditor be concerned with when searching for and evaluating evidence? c.List and explain the objective and benefits of financial statement audit.arrow_forwardSaleha was recently hired by the accounting firm of Haron & Associates. After two weeks of joining the firm, Saleha was sent to the first-year staff training course. The instructor asked her to prepare answers for the following questions:a. Briefly explain the definition of Audit Evidence.b. How does evidence relate to assertions and to the audit report?c. What are the characteristics of evidence should an auditor be concerned with when searching for and evaluating evidence? d.List and explain the objective and benefits of financial statement audit.arrow_forward
- You are an induction and training officer for Maher Public Accountants, a leading accounting firm based in Dublin, Ireland. You are due to give a training course to a group of newly recruited audit trainees in fraud and error. This is a particularly important course and audit trainees from previous cohorts have acknowledged the benefit of the course in their feedback. The current cohort of audit trainees are particularly interested in understanding their responsibilities and those of the directors in the area of fraud and error. Required:Prepare material for the audit trainees as part of the induction pack which covers the following:(a) Identify and distinguish the responsibilities of the auditor and the directors with regards to fraud. (b) Discuss the steps undertaken by auditors when they detect and suspect fraud. (c) Critically examine the limitations of audit procedures in detecting fraud and error.arrow_forwardYou are a senior manager in the audit department of Raven & Co. You are reviewing three situations which have arisen in respect of audit clients, which were recently discussed at the monthly audit managers' meeting:Grouse Co is a significant audit client which develops software packages. Its managing director, Max Partridge, has contacted one of your firm's partners regarding a potential business opportunity. The proposal is that Grouse Co and Raven & Co could jointly develop accounting and tax calculation software, and that revenue from sales of the software would be equally split between the two firms. Max thinks that Raven & Co's audit clients would be a good customer base for the product. Plover Co is a private hospital which provides elective medical services, such as laser eye surgery to improve eyesight. The audit of its financial statements for the year ended 31 March 2012 is currently taking place. The audit senior overheard one of the surgeons who performs laser…arrow_forwardBarbara Wells is a first-year auditor for a large public accounting firm. She was assigned to audit Larson Brothers; the CEO of Larson is her brother. She discussed some of her findings with family members. What is the relevant requirement (s) for the ethical behavior of an auditor? a. Qualified to carry out the scope of service b. Confidential c. All of those listed d. Independencearrow_forward
- Erica Gray, CPA, is a sole practitioner. She has been practicing as an auditor for 10 years. Recently a long-standing audit client asked Gray to design and implement an integrated computer-based accounting information system. The fees associated with this additional engagement with the client are very attractive. However, Gray wonders if she can remain objective on subsequent audits in her evaluation of the client’s accounting system and its records if she was responsible for its design and implementation. Gray knows that professional auditing standards require her to remain independent in fact and appearance from her auditing clients. Submit a substantive posting of at least 250 words that answers the questions Question 1: What do you believe auditing standards are mainly concerned with when they require independence in fact? In appearance? Question 2: Why is it important that auditors remain independent of their clients? Question 3: Do you think Gray can accept this engagement and…arrow_forwardErica Gray, CPA, is a sole practitioner. She has been practicing as an auditor for 10 years. Recently a long-standing audit client asked Gray to design and implement an integrated computer-based accounting information system. The fees associated with this additional engagement with the client are very attractive. However, Gray wonders if she can remain objective on subsequent audits in her evaluation of the client’s accounting system and its records if she was responsible for its design and implementation. Gray knows that professional auditing standards require her to remain independent in fact and appearance from her auditing clients. Required 1. What do you believe auditing standards are mainly concerned with when they require independence in fact? In appearance? 2. Why is it important that auditors remain independent of their clients? 3. Do you think Gray can accept this engagement and remain independent? Justify your response.arrow_forwardDave and Charlie are sitting at lunch one day on the premises of one of their large audit clients when the topic of going concern comes up. Dave mentions to Charlie that he vaguely recalls hearing this term in his accounting classes back in college, but doesn't remember what this means or why it is part of the audit. Which of the following responses by Charlie would help Dave to understand this? (Select all that apply.) Going concern deals with the entity's ability to continue operating as an enterprise, and is an important assumption that the auditor should evaluate. The going concern assumption is required to be evaluated by management each year for the forthcoming year. The going concern assumption is tested by evaluating management's breach of loan and debt covenants over the past three years. Going concern really speaks to the client firm's ability to pay its short-term liabilities when they come due, and whether the firm will need to refinance maturing loans to conserve cash.arrow_forward
- Karen Sepan, a recent graduate of the local state university, is presently employedby a large manufacturing company. She has been asked by Jose Martinez, controller, to prepare the company’s response to a current Preliminary Views published by the Financial Accounting Standards Board (FASB). Sepan knows that the FASB has a conceptual framework, and she believes that these concept statements could be used to support the company’s response to thePreliminary Views. She has prepared a rough draft of the response citing the objective of financial reporting. Instructions(a) Identify the objective of financial reporting.(b) Describe the level of sophistication expected of the users of financial information by the objective of financial reporting.arrow_forwardSarah O’Hann enjoyed taking her first auditing course as part of her undergraduate accounting program. While at home during her semester break, she and her father discussed the class, and it was clear that he didn’t really understand the nature of the audit process as he asked the following questions. What is the main objective of the audit of an entity’s financial statements? Given the CPA firm is auditing financial statements, why would they need to understand anything about the client’s business? What does the auditor do in an audit other than verify the mathematical accuracy of the numbers in the financial statements? The audit represents the CPA firm’s guarantee about the accuracy of the financial statements, right? Isn’t the auditor’s primary responsibility to detect all kinds of fraud at the client?arrow_forwardYou were recently hired by the CPA firm Honson & Hansen. Before you start working, the firm requires that you participate in the first-year staff training course. The instructor asks you to prepare answers for the following questions: a. How is audit evidence defined? b. How is the collection of audit evidence related to management assertions? c. What are the two key characteristics of audit evidence that an auditor must consider when evaluating the quality of the evidence? Describe the meaning of each of these characteristics in the context of auditing.arrow_forward
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education