Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 12, Problem 16.1MCQ
To determine
Identify by whom the material misstatements will not be detected under the condition of internal control deficiency.
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Students have asked these similar questions
In accounting, which term describes deficiencies or flaws in the design or operation of internal controls that could increase the risk of errors, fraud, or misstatements in financial reporting? a) External audit b) Compliance review c) Internal control weaknesses d) Financial statement analysis
3. Which of the following is NOT part of the control activities applicable to Financial Statement Audit?
a. Segregation of duties to prevent opportunities to commit fraud , conceal errors and other irregularities
b. Performance Review like comparison of actual performance with budget, forecasts and previous year's performance
c. Compliance to reportorial requirements to regulatory bodies.
d. Physical controls, ensuring adequate safeguards over access to assets and records.
The likelihood that material misstatements may have entered the accounting system and notbeen detected and corrected by the client’s internal control is referred to asa. Inherent risk.b. Control risk.c. Detection risk.d. Risk of material misstatement.
Chapter 12 Solutions
Auditing And Assurance Services
Ch. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Describe how the nature of evidence used to...Ch. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - Prob. 15RQCh. 12 - Prob. 16.1MCQCh. 12 - Prob. 16.2MCQCh. 12 - Prob. 16.3MCQCh. 12 - Prob. 17.1MCQCh. 12 - Prob. 17.2MCQCh. 12 - Prob. 17.3MCQCh. 12 - Prob. 18.1MCQCh. 12 - Prob. 18.2MCQCh. 12 - Prob. 18.3MCQCh. 12 - Prob. 19.1MCQCh. 12 - Prob. 19.2MCQCh. 12 - Prob. 19.3MCQCh. 12 - Prob. 20DQPCh. 12 - Prob. 21DQPCh. 12 - Prob. 22DQPCh. 12 - Prob. 23DQPCh. 12 - Prob. 24DQPCh. 12 - Prob. 25DQPCh. 12 - Prob. 26DQPCh. 12 - Prob. 27DQPCh. 12 - A CPAs client, Boos Baumkirchner, Inc., is a...Ch. 12 - Prob. 29DQPCh. 12 - Prob. 30DQPCh. 12 - Based on a cost-benefit analysis, management at...Ch. 12 - Prob. 32DQPCh. 12 - Prob. 33DQPCh. 12 - Prob. 34DQP
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Similar questions
- When completing the audit of internal controls for an issuer, the severity of an internal control deficiency depends ona. Whether there is a reasonable possibility that the company’s controls will fail to prevent or detect a misstatement of an account balance or disclosure.b. Whether a misstatement has actually occurred as a result of the deficiency.c. The magnitude of the potential misstatement resulting from the deficiency or the deficiencies.d. Both a and c are correct.e. All of the above are correct.arrow_forwardThe following are examples of circumstances that may indicate the possibility that the financial statements may contain a material misstatement resulting from fraud, except Group of answer choices Last-minute adjustments that significantly affect financial results or unusual journal entries. Transactions that are recorded in a complete or timely manner or are properly recorded as to amount, accounting period, classification, or entity policy. Unsupported or unauthorized balances or transactions. Tips or complaints to the auditor about alleged fraud.arrow_forwardIn a financial statement audit, inherent risk represents a. The risk that misstatements could occur and not be detected by the auditor's procedures. b. The risk that misstatements could occur and not be prevented or detected by the system of internal control. c. The risk that the auditor fails to modify materially misstated financial statements. d. The susceptibility of an account balance to misstatement that could be material.arrow_forward
- This is a process of evaluating the effectiveness of a client's internal controls in preventing or detecting material misstatements in the financial statements is called __________________ (answer in All CAPS)arrow_forwardWhy is there a need on the part of the client entity to monitor internal controls over time? a. Because the auditor needs to obtain understanding of internal control b. Because unmonitored controls tend to deteriorate over time c. Because it will affect the timing of substantive audit procedures d. Because it is a requirement of the applicable financial reporting frameworkarrow_forwardIt refers to the risks that a material misstatement will even occur, that it would not be prevented ordetected by client internal controls, and that is not detected by the auditor’s own procedures.a. Inherent riskb. Control riskc. Detection riskd. Audit risk Audit risk and materiality are considered at the level ofa. Overall financial statements.b. Assertions relating to individual account balance, class of transactions, or disclosure.c. Both a and b.d. Neither a nor b.arrow_forward
- Items 1 through 6 are questions typically found in a standardinternal control questionnaire used by auditors to obtain an understanding of internalcontrol for notes payable. In using the questionnaire for a client, a “yes” response indicatesa possible internal control, whereas a “no” indicates a potential deficiency.1. Are liabilities for notes payable incurred only after written authorization by a propercompany official?2. Are paid notes cancelled and retained in the company files?3. Is a notes payable master file maintained?4. Is a periodic reconciliation made of the notes payable master file with the actualnotes outstanding by an individual who does not maintain the master file?5. Is the individual who maintains the notes payable master file someone other thanthe person who approves the issue of new notes or handles cash?6. Are interest expense and accrued interest recomputed periodically by an individualwho does not record interest transactions?a. For each of the preceding…arrow_forwardThe most important objective of risk assessment procedures performed by auditor is a. To identify and assess financial risk in the activities of the entity b. To identify and assess the risk in achieving the entity objectives c. To detect material misstatements in the financial statements d. To detect errors and fraud occurred in the books of accountsarrow_forward(i) Which of the following statements correctly explains the responsibility of the external auditor?A. Responsibility to provide reasonable assurance that the financial statements are free from material error or misstatement.B. Responsibility for identifying and correcting any errors or misrepresentations in the financial statements.C. Responsibility for the reliability of the information that financial statements provide.D. Responsibility to prepare financial statements. (ii) Operational controls are designed to prevent failures in operational procedures caused by: i. Machine breakdown and human error ii. Failures in the performance of systems and weaknesses in procedures. iii. Poor management iv. Risks of errors or fraud in accounting systems and accounting and finance activities. A. i and ii onlyB. i, ii and iii onlyC. i, ii and iv onlyD. All of the above (iii) Risk tolerance refers to A. The amount of risk the company is prepared to accept in order to achieve its financial…arrow_forward
- The auditor’s primary consideration is whether, and how, internal control prevents, or detects and corrects: Material misstatement of the entity’s financial statements Financial statement fraud Incentives that prompt an employee to behave improperly illegal actions of the Managementarrow_forwardService organization control (SOC) reports may be requested by auditors when a service organization processes transactions related to a client's (user organization) internal control over financial reporting. Required: For each of the following statements related to Service Organization Control (SOC) reports, indicate whether it is appropriately related to a Type 1 report (T1), Type 2 report (T2), both a Type 1 and Type 2 report (B), or neither a Type 1 or Type 2 report (N). a. Disclaims an opinion on the fairness of the entity's financial statements. b. Provides a description of the service organization's internal control over financial reporting. c. Summarizes tests of operating effectiveness of controls at the service organization. d. Expresses an opinion on the suitability of design of internal controls over financial reporting. B e. Use of the service auditor's report is restricted to specified parties. f. Would be requested when client is an issuer. g. Disclaims an opinion on the…arrow_forwardWith respect to fraudulent financial reporting, which one of the following statements is not correct? a.The risk that the auditor will not detect misstatement due to management fraud is greater than those due to employee fraud. b.It is difficult for the auditor to determine if misstatements in accounting estimates are caused by fraud or error. c.When the audit is properly planned and performed in accordance with ISAs, material misstatements are guaranteed to be detected by the auditor. d.Excessive pressure on management to meet expectations of third parties creates incentives forarrow_forward
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