Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 18, Problem 32FOQ
To determine
Identify the appropriate answer related to the appropriate audit report on internal control.
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Which of the following statements is not true with respect to written representations?a. The failure of management to furnish them is a significant scope limitation, resulting in either an adverse opinion or a disclaimer of opinion.b. They should address management’s responsibility for designing internal control to prevent and detect fraud.c. Auditors use them to corroborate information received during the audit from the client and its employees.d. They are dated the same date as the auditor’s reports.
Supervision and review are essential parts of managing an engagement.
When the auditor obtains audit evidence about the operating effectiveness of controls during an interim period, that is enough to support reliance to reduce substantive procedures to be performed at year-end.
Group of answer choices
True, False
True, True
False, True
False, False
Which of the following statements concerning the independent auditor's required communication of material weaknesses in internal control is correct?
A. Although written communication is preferable, the auditor may communicate the findings orally.
B. Weaknesse that had been reported in prior years' communications and have not been corrected need not be repeated in the current year's communication.
C. If the auditor is not aware of any material weaknesses during the examination, that fact must be communicated.
D. Weaknesses reported at interim dates must be repeated in the final communication.
Chapter 18 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 18 - Prob. 1RQCh. 18 - Prob. 2RQCh. 18 - Prob. 3RQCh. 18 - Prob. 4RQCh. 18 - Prob. 5RQCh. 18 - Prob. 6RQCh. 18 - Prob. 7RQCh. 18 - Prob. 8RQCh. 18 - Prob. 9RQCh. 18 - Prob. 10RQ
Ch. 18 - Prob. 11RQCh. 18 - Prob. 12RQCh. 18 - Prob. 13RQCh. 18 - Prob. 14RQCh. 18 - Prob. 15RQCh. 18 - Prob. 16RQCh. 18 - Prob. 17RQCh. 18 - Prob. 18RQCh. 18 - Prob. 19RQCh. 18 - Prob. 20RQCh. 18 - Prob. 21RQCh. 18 - Prob. 22RQCh. 18 - Prob. 23RQCh. 18 - Prob. 24RQCh. 18 - Prob. 25RQCh. 18 - Prob. 26RQCh. 18 - Prob. 27RQCh. 18 - Prob. 28RQCh. 18 - Prob. 29QRACh. 18 - Prob. 30QRACh. 18 - Prob. 31QRACh. 18 - Prob. 32AOQCh. 18 - Prob. 32BOQCh. 18 - Prob. 32COQCh. 18 - Prob. 32DOQCh. 18 - Prob. 32EOQCh. 18 - Prob. 32FOQCh. 18 - Prob. 32GOQCh. 18 - Prob. 32HOQCh. 18 - Prob. 32IOQCh. 18 - Prob. 32JOQCh. 18 - Prob. 32KOQCh. 18 - Prob. 32LOQCh. 18 - Prob. 33OQCh. 18 - Prob. 34OQCh. 18 - Prob. 35OQCh. 18 - Match the following definitions (or partial...Ch. 18 - Prob. 37PCh. 18 - Prob. 38ITC
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- 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_forward1. Which of the following procedures is most appropriately done if the control risk and inherent risk was assessed at a below maximum level where the management does not have effective internal controls in place? * Omit test of controls, then perform substantive testing at year-end Perform tests of controls, then perform substantive testing at year-end Perform tests of controls, then perform substantive testing at an interim period Omit test of controls, then perform substantive testing at an interim period 2. In auditing the financial statements of ESELYU Inc., the management has deliberately precluded you from gathering evidence in one of its cash accounts which you perceive to be material in regards to the audit. Which of the following audit opinion are you most likely to express? * Qualified opinion if the item is material and pervasive Unqualified Opinion if the item is material and…arrow_forwardS1: The subsequent events period extends to the date of management representation letter and the auditor’s report. S2: The failure of management to provide a management representation letter is considered a scope limitation on the audit.a. Only S1 is true.b. Only S2 is true.c. Both S1 and S2 are true.d. Both S1 and S2 are false.arrow_forward
- 1: Additional compliance tests is necessary when an auditor may desire a further reduction in the assessed level of control risk in order to reduce even further the extent of substantive tests to be applied to year-end account balances.$2: Regardless of how low the assessed level of control risk, the acceptable level of detection risk could never be so low as to preclude the need for any substantive tests at all.$3: Material weaknesses are those reportable conditions for which there is more than a relatively moderate risk that the deficiency may result in misstatements that are material to the financial statements. A: Ifall statements are correct. B-If only one statement is correct. C-If only two statements are correct. D- If all statements are incorrect.arrow_forward(A) The requirement is to find the best statement concerning an auditor’s assessment of control risk. Answer (A) is correct because assessing control risk may be performed concurrently during an audit with obtaining an understanding of internal control. Answer (B) is incorrect because evidence about the operation of internal control from prior audits is useful in planning and executing the current year’s assessment of control risk. Answer (C) is incorrect because the basis for an auditor’s conclusions about the level of control risk must be documented when at any time control risk is assessed below maximum. Answer (D) is incorrect because a lower level of control risk requires more assurance, not less, that the controls are operating effectively.arrow_forward1)Which of the following factors most likely would cause an auditor to decline a new audit engagement? A.Concluding that the entity’s management probably lacks integrity. B.An inability to perform preliminary analytical procedures before assessing control risk. C.An inadequate understanding of the entity’s internal control. D.The close proximity to the end of the entity’s reporting period. 2)Before accepting an engagement to audit a new client, an auditor is required to A.Obtain a copy of the client’s financial statements. B.Prepare amemorandum setting forth the staffing requirements and documenting the preliminary audit plan. C.Make inquiries of the predecessor auditor after obtaining consent of the prospective client. D.Discuss the management representation letter with the client’s audit committee. 3)Which of the following conditions most likely would pose the greater risk in accepting a new audit engagement?A.There will be a client-imposed scope limitation. B.The client’s…arrow_forward
- If the auditor performing an integrated audit identifies one or more material weaknesses in a nonissuer's internal control, the auditor should: A.Expand the audit of internal controle to identify deficiencies less severe than material weaknesses. B. Conclude that the financial statements are materially misstated because of the material weakness in internal control. C. Disclaim an opinion on internal control. D. Express an adverse opinion on the entity's internal control.arrow_forwardAfter considering the client's internal control the auditors have concluded that it is well designed and is functioning as anticipated. Under these circumstances the auditors would most likely: Cease to perform substantive procedures, Reduce substantive procedures in areas where the internal control was found to be effective, Increase the extent of anticipated analytical procedures, Perform all tests of control to the extent outlined in the preplanned audit programarrow_forwardIn response to an increased level of assessed risk of material misstatement, an auditor of anonissuer would generally A.Not make changes to the nature, timing, or extent of further audit procedures. B.Increase the emphasis on professional skepticism when gathering and evaluating auditevidence with the audit team. C.Perform more substantive audit procedures at an interim date instead of at period end. D.Perform additional tests of controls at an interim date to eliminate the need for substantivetests at period endarrow_forward
- Which one of the following is other indicator or events or conditions that may cast significant doubt continue as a going concern? the entity's ability If the auditor found misstatements in financial statements resulting from fraud, the auditor encounters exceptional circumstances that bring into question his ability to continue performing the audit. the auditor shall : Ask the management for his withdrawal. Determine the professional and legal responsibilities applicable in the circumstances. Withdraw from the engagement immediately. Report to audit team regarding withdrawal. If the auditor identify and assess the risk of material misstatement due to fraud or error relating entity's related activities auditor shall: 1. Inquiry with management and others within the entity. Auditing ENarrow_forwardWhich of the following is consistent with an assessed level of control risk at below the maximum level after completing the auditors consideration of the client's internal control over receivables? * a. Increased materiality level in selecting receivables to be confirmed and use a positive confirmation letter. b. Increased materiality level in selecting receivables to be confirmed and use a negative confirmation letter. c. Decrease materiality level in selecting receivables to be confirmed and use a negative confirmation letter. d. Decrease materiality level in selecting receivables to be confirmed and use a positive confirmation letter. e. None of the abovearrow_forwardIndicate whether you agree or disagree with each statement, and explain your reasoning. Each of the following changes (considered independently and holding other things constant) can be expected to decrease the level of detection risk associated with the auditor s substantive tests: 1. decreasing materiality 2. increasing inherent risk 3. decreasing audit risk An auditor was appointed to the audit of BID Inc. (BID) subsequent to BID s year-end date. BID is in the business of providing IT consulting services and is also a computer equipment reseller. BID only orders inventory from the manufacturer once a customer has placed an order. This allows for BID to have low levels of inventory. As a result of being appointed to the audit subsequent to year end, the auditor was unable to attend the year-end inventory count and could not obtain sufficient and appropriate audit evidence for the inventory balance. In this circumstance the auditor should issue a qualified opinion…arrow_forward
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