PRIN.OF AUDITING+OTHER...(LL) >CUSTOM<
21st Edition
ISBN: 9781260824308
Author: WHITTINGTON
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 14A, Problem 1P
a.
To determine
Indicate the type of error or fraud that the control serves to prevent or detect in the given controls.
a.
Expert Solution
Explanation of Solution
Internal control:
Internal control is a process of controlling the activities within the organization. Business deals with various set of activities. To perform every activity effectively, the management of the company should control and manage the activities. The control of these activities is known as an internal control.
Error or fraud in the financial statement:
When there is a misstatement of the financial statements of the company because of the intentional and unintentional error then it is known as error or fraud in the financial statement.
Indicate the type of error or fraud that the control serves to prevent or detect in the given controls:
| Control | Error or Fraud Controlled |
| 1 | This activity would provide control over the unauthorized and invalid payment of the accounts payable. |
| 2 | This activity would control over the completeness of the transactions. |
| 3 | This activity would prevent the chances of duplicate transactions. |
b.
To determine
Provide the test of control for the provided internal control of the client.
b.
Expert Solution
Explanation of Solution
Test of control:
Test of control is performed by the auditor to verify that the control process is effective and efficient enough or not. It consists of the following two activities:
- Test of control recognizes the control process required to prevent the material misstatement.
- Test of control asses that the control process is operating effectively or not.
Provide the test of control for the provided internal control of the client:
| Control | Tests of Controls |
| 1 | The auditor can test the control over the reconciliation by reviewing the |
| 2 | The auditor can test the control by randomly checking the entries in the receiving report. The auditor can randomly pick a few consecutive transactions and consider that their numbers are in sequence. |
| 3 | The auditor should review the mailing register and review the signature for the individual who mailed the checks. |
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Students have asked these similar questions
An auditor would be most likely to assess control risk at the maximum level in an electronic environment with automated system-generated information when:Select one:
a.
Fixed asset transactions are few in number, but large in dollar amount.
b.
Payables are based on many transactions and large in dollar amount.
c.
Accounts receivable records are based on many transactions and are large in dollar amount.
d.
Sales orders are initiated using predetermined, automated decision rules.
Which of the following describes preventive controls? (Several choices may be correct.)
Expected to be 100% effective.
O Easily verified as to whether the control has worked.
O Designed to stop misstatement from occurring.
O Applied to each transaction prior to entering transactions into the accounting system.
Applied to each transaction after transactions have been processed.
O Designed to detect fraud or errors that have occurred.
For this assignment, you are to construct a diagram of the Fraud Triangle and clearly label each component of the Fraud Triangle. For each of these three components, provide the following:
An explanation (two to three paragraphs) of each of the three components, specifically addressing how it could contribute to fraud.
For each component of the Fraud Triangle, provide the following:
List and briefly discuss internal controls for each of the three components that could help to reduce the impact of potential frauds related to that component of the Fraud Triangle.
Note: This means that you will have a total of 24 internal controls documented. A few of the internal controls might be common to each component but please tailor them to the component you are referring to and do not copy and paste the same eight internal controls for each component.
While APA style is not required for the body of this assignment, solid academic writing is expected and in-text citations and references should be…
Chapter 14A Solutions
PRIN.OF AUDITING+OTHER...(LL) >CUSTOM<
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