Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Concept explainers
Question
Chapter 10, Problem 21.2MCQ
To determine
Identify the statement true in relation to fraud risk assessment discussion.
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Students have asked these similar questions
a) The primary responsibility for the prevention and detection of fraud rests with
both those charged with governance of the entity and management. Do you
agree? Why or why not? Justify your answer.
b) Communicating significant risks identified by the auditor helps those charged
with governance understand those matters and why they require special audit
consideration. Which matters should be communicated regarding identified
significant risks?
During its preparatory conversation concerning fraud risks, what factors should the audit team take into account?
Auditing standards require that the engagement team members engage in discussion about the susceptibility of the financial statements to the risk of fraud. How does this discussion relate to the required discussion about the risk of material misstatement?
Chapter 10 Solutions
Auditing And Assurance Services
Ch. 10 - Prob. 1RQCh. 10 - Define misappropriation of assets and give two...Ch. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - Prob. 12RQCh. 10 - Prob. 13RQCh. 10 - Prob. 14RQCh. 10 - Prob. 15RQCh. 10 - Prob. 16RQCh. 10 - Prob. 17RQCh. 10 - Prob. 18.1MCQCh. 10 - Prob. 18.2MCQCh. 10 - Prob. 18.3MCQCh. 10 - Prob. 19.1MCQCh. 10 - Prob. 19.2MCQCh. 10 - Prob. 19.3MCQCh. 10 - Prob. 20.1MCQCh. 10 - Prob. 20.2MCQCh. 10 - Prob. 20.3MCQCh. 10 - Prob. 21.1MCQCh. 10 - Prob. 21.2MCQCh. 10 - Prob. 21.3MCQCh. 10 - Prob. 22DQPCh. 10 - Prob. 23DQPCh. 10 - Prob. 24DQPCh. 10 - Prob. 26DQPCh. 10 - Prob. 27DQPCh. 10 - Prob. 28DQPCh. 10 - Prob. 30DQPCh. 10 - Prob. 31DQPCh. 10 - Prob. 32DQPCh. 10 - Prob. 33DQP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The use of an audit engagement letter is the best method of assuring the auditor will have which of the following?Select one: a. Cooperation from other auditors b. Auditor will obtain sufficient appropriate audit evidence. c. Access to all books, accounts and vouchers required for audit purpose d. Management representation letterarrow_forward(i) Differentiate between the audit strategy and the audit plan. (ii) Explain the term ‘analytical procedures’ and outline the different types of analytical procedures available to the auditor indicating situations in the audit when they can be used iv. State audit procedures that auditor may follow to assess fraud.arrow_forwardAuditing standards require that a “brainstorming” session should be held at the beginning of each audit to help identify steps to assess the possibility that material misstatements/fraud in the financial statements exist. Discuss how brainstorming sessions might enhance audit judgments, professional skepticism, and decision making. Consider the groupthink dimension in your discussion.arrow_forward
- The primary purpose of accumulating sufficient and appropriate audit evidence is to Group of answer choices a. Support the auditor’s opinion on the financial statements. b. Detect fraud in the financial statements. c. Defend the auditor in case of legal dispute. d. Evaluate the performance of the management of an entity.arrow_forwardWhen conducting an audit, business risk must be considered.a) Define business risk in the context of an audit and outline various potential sources of risk.b) What is the relationship between business risk and the audit's preliminary analytical procedures?c) When preparing an audit engagement, there are four key areas to consider, each with its own set of sub-areas. Please indicate the four primary regions as well as the relevant sub-parts.arrow_forwardWhen planning the audit, the auditor should make inquiries of management in order to do the following, except Group of answer choices Determine whether management and other within the entity (e.g., internal audit function) have knowledge of any actual, suspected or alleged fraud affecting the entity. Provide useful information concerning the risks of material misstatements in the financial statements resulting from management fraud. Obtain an understanding of the accounting and internal control systems management has put in place to address fraud and error. Obtain an understanding of management’s assessment of the risk that the financial statements may be materially misstated as a result of fraud.arrow_forward
- Auditors are required to obtain a sufficient understanding of each component of a client’s internal control. This understanding is used toassess control risk and plan the audit of the client’s financial statements.Required:a. For what purposes should an auditors’ understanding of the internal control components be used in planning an audit?b. What is required for an audit team to assess control risk below the maximum level?c. What should an audit team consider when seeking to reduce the planned assessed level of control risk below the maximum?d. What are the documentation requirements concerning a client’s internal control components and the assessed level of control risk?arrow_forwardIdentify how each of the following statements relates to the performance principle by considering which element(s) of the principle are related to that statement. (A statement may be related to more than one element.) Use the following elements in providing your response: Reasonable assurance • Planning and supervision • Materiality ⚫ Risk assessment • Audit evidence a. Evaluating the effectiveness of the client's internal control in preventing or detecting misstatements. b. Obtaining an understanding of the client's business and industry. c. Acknowledging that the risk of failing to detect a material misstatement cannot be reduced to zero. d. Obtaining confirmations from the client's customers as to the ending balances in accounts receivable. e. Preparing a written audit plan. f. Designing audit procedures to identify misstatements that would have a significant effect on financial statement users' decisions. g. Considering the likelihood that the account balance contains a material…arrow_forwardO LO 2-4 Wren, Inc., a nonpublic company, retains Ying and Company CPA to audit its financial statements and internal control. Sarah Smith, the senior on the audit prepared the following first draft of an unmodified report: 2-33. Page 69 Independent Registered Auditor's Report (Comment a) To the Board of Directors and Management of Wren, Inc. (Comment b) Phoenix, AZ 85011 Opinion We have audited the financial statements of Wren, Inc., which comprise the balance sheet as of December 31, 20X1, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended, and the related notes to the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Wren, Inc. as of December 31, 20X1, and the results of its operations and its cash flows for the year then ended in accordance with Financial Accounting Standards Board (Comment c) accounting principles generally…arrow_forward
- What are the objectives of audit risk assessment, and why is it important in assessing the likelihood that fraud may occur? Explain why risk assessment performed during audit planning sets the tone for the entire audit engagement.arrow_forwardWhich of the following statements best describes auditors’ responsibility for detecting a client’s noncompliance with a law or regulation?a. The responsibility for detecting noncompliance exactly parallels the responsibility for errors and fraud.b. Auditors must design tests to detect all material noncompliance that indirectly affects the financial statements.c. Auditors must design tests to obtain reasonable assurance that all noncompliance with direct material financial statement effects is detected.d. Auditors must design tests to detect all noncompliance that directly affects the financial statements.arrow_forward
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