Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 12, Problem 2RQ
To determine
Identify whether the approach of CPA JM is correct while auditing the financial statement of the company.
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Marsha Mason, CPA, believes that it is appropriate to obtain an understanding of internal control about halfway through the audit, after she is familiar with the client’s operations and the way the system actually works. She has found through experience that filling out internal control questionnaires and flowcharts early in the engagement is not beneficial because the system rarely functions that way it is supposed to. Later in the engagement, the auditor can prepare flowcharts and questionnaires with relative ease because of the knowledge already obtained on the audit. Evaluate her approach.
You are an independent auditor attending an engagement interview with the client. The client’s organization has recently implemented a data warehouse. Management is concerned that the audit tests that you perform will disrupt operations and suggests that instead of running tests against the live operational database, you draw the data for your analytical reviews and substantive tests of details from the data warehouse. Management points out that operational data are copied weekly into the warehouse and everything you need will be contained there. This will enable you to perform your tests without disrupting routine operations. You agree to give this some thought and get back to the client with your answer. Required Draft a memo to the client outlining your response to their proposal. Mention any concerns you might have.
1. Computer Assisted Audit Techniques (CAATs) are important tools than an IS auditor uses to gather and analyze data during an IS audit. One type of tool is the Generalized Audit Software (GAS). In your own words, how does CAATs affect the work of an IS auditor? What are the benefits of using CAATs in conducting an Audit?
2. Every organization has controls in place. Such controls must be effective. They are effective if they prevent, detect, or contain incidents and enable recovery from events that cause risks. Enumerate those three types of control and explain how these controls effectively address those events that cause risks
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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- An IT auditor is performing a test of the company's user access administration process, and has selected a random sample of 25 user access requests to evaluate. The IT audit test procedures revealed that 1 of the 25 sampled user access requests has not been properly authorized according to company policy. As a key next step in the IT audit process, the IT auditor should (select the BEST response): a) Communicate this concern to the Chief Executive Officer as soon as possible. b) Communicate this concern to the Audit Committee as soon as possible. c) Disregard the finding entirely. d) Perform additional audit procedures to better understand the risks related to the issue, as well as the root cause of the problem.arrow_forwardYou are an auditor. The client's organization has recently implemented ERP system and data warehouse. During the engagement interview with the client, management has suggested that instead of running tests against the live operational database, you can draw the data from your tests of details from the data warehouse. This is because management believe that audit tests against the live operational database can disrupt operations. Management explains that data are updated weekly in the data warehouse. You need to think about their suggestion and get back to them with your answer. Required: write a memo to the management with your answer to their suggestion and your concerns (if any).arrow_forwardConsider “control environment.” Why it is important for auditors to understand a client’s control environment. What are some limitations of internal controls? Now consider “segregation of duties.” Determine why it is important in an IT environment. What are some advantages of using IT and audit software when conducting an audit?arrow_forward
- Operating system security involves policies, procedures, and controls that determine who can access the operating system. User access privileges are assigned to individuals and to entire workgroups authorized to use the system.The way access privileges are assigned influences system security. Priviliges should be carefully administered and closely monitored for compliance with organizational policy. Choose one of the options below, that is not a test of control of the audit objective relating to access privileges. a. Review employee records to determine whether users have formally acknowledged their responsibility to maintain the confidentiality of company data.b. Review the privileges of a selection of user groups and individuals to determine if their access rights are appropriate for their job descriptions and positions.c. The auditor should verify that individuals are granted access to data and programs based on their need to know.d. Review the account lockout policy and procedures…arrow_forwardYou are currently working in a mid-tier accounting firm. In an engagement meeting with a client, the management of your client is concerned that the audit tests that you perform will disrupt operations. Your client has recently implemented a data warehouse and the management suggests that you draw the data for analytical reviews and substantive testing from the data warehouse instead of the operational database. The management points out that operational data are copied weekly into the data warehouse and all data you need are contained there.Outline your response to the management’s proposal and mention any concerns you might have.arrow_forwardS1: The role played by the audit committee is so significant that an ineffective audit committee or lack of it influences the auditor's assessment of the control environment. S2: Making the narrative description to document understanding of client's internal control is less time consuming compared to merely checking the answer columns in the ICQ method. S3: After obtaining sufficient knowledge about the internal control structure and verifying that the policies and procedures have actually been placed in operation, the next step would be to determine the planned assessed level of control risk for the different financial statement assertions. A. all statements are true B. all statements are false C. S1 and S2 are true D. S1 and S3 are truearrow_forward
- 1. How can internal auditors use histograms during internal audits? 2. How can management use control charts as part of their ongoing monitoring activities? 3. How can the 5S model be used during an operational audit? 4. How is transporting a waste? Provide an example to support your answer. 5. Describe the impact of defects on organizational success from an internal and external (e.g., competitive) perspective. 6. Describe three reasons why waiting is damaging to organizations. 7. Provide three recommendations to minimize the presence of underutilized employees. 8. Explain the elements of the CCCER/5C model. 9. Explain three methodologies that can help operational auditors find the root cause of operational deficiencies. 10. List three actions that can help to make findings and recommendations more persuasivearrow_forwardYou are currently working in a mid-tier accounting firm. In an engagement meeting with a client, the management of your client is concerned that the audit tests that you perform will disrupt operations.Your client has recently implemented a data warehouse and the management suggests that you draw the data for analytical reviews and substantive testing from the data warehouse instead of theoperational database. The management points out that operational data are copied weekly into thedata warehouse and all data you need are contained there. Outline your response to the management’s proposal and mention any concerns you might have.arrow_forwardYou are currently working in a mid-tier accounting firm. In an engagement meeting with a client, the management of your client is concerned that the audit tests that you perform will disrupt operations. Your client has recently implemented a data warehouse and the management suggests that you draw the data for analytical reviews and substantive testing from the data warehouse instead of the operational database. The management points out that operational data are copied weekly into the data warehouse and all data you need are contained there. Q. Outline your response to the management’s proposal and mention any concerns you might have.arrow_forward
- In assessing the possibility of invalid data in a human resources computer system, such as incorrect job classifications, ages exceeding retirement age, or erroneous ethnic classifications, the auditor should employ the following approach to determine the potential extent of the problem:Select one: a. Submit test data to test the effectiveness of edit controls over the input of data. b. Use generalized audit software to select a sample of employees. Use the sample to determine the validity of data items and project the result to the population as a whole. c. Review and test access controls to ensure that access is limited to authorized individuals. d. Use generalized audit software to develop a detailed report of all data outside specified parameters.arrow_forwardAddress the questions in perspective of auditing 1. How can internal auditors use histograms during internal audits? 2. How can management use control charts as part of their ongoing monitoring activities? 3. How can the 5S model be used during an operational audit? 4. How is transporting a waste? Provide an example to support your answer. 5. Describe the impact of defects on organizational success from an internal and external (e.g., competitive) perspective. 6. Describe three reasons why waiting is damaging to organizations. 7. Provide three recommendations to minimize the presence of underutilized employees. 8. Explain the elements of the CCCER/5C model. 9. Explain three methodologies that can help operational auditors find the root cause of operational deficiencies. 10. List three actions that can help to make findings and recommendations more persuasivearrow_forward
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