Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 20DQP
a.
To determine
Identify the defense that Company L should use in the suit by Company S.
b.
To determine
Find out the defense should Company U use in the suit by Bank F.
c.
To determine
State whether Person Y is likely to be successful in the defenses.
d.
To determine
Identify whether the issues or outcome is significantly different if the suit is brought under the securities Exchange Act of 1934.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
During the audit of Seahorse LLC, the external auditors, Packhorse CPAS, have just completed their audit of the clients
system of internal control and have documented their findings accordingly. One of Packhorse CPAs audit managers is
discussing the results of the internal control audit with an audit intern, Halle. Halle is curious as to what the auditing firm
will do with this information and these findings, and whether it affects any future parts of the audit. Which of the
following responses is correct with respect to helping
Halle understand this?
• The audit of internal control is performed by the audit firm to comply with generally accepted auditing standards. With
this part of the audit complete, the auditor can render an opinion on the client's financial statements.
• Once the audit of the client's system of internal control is complete, the auditor examines the findings and apprises the
client's management of any weaknesses in a timely manner. If weaknesses in internal control…
Lauren Yost & Co., a medium-sized CPA firm, was engagedto audit Stuart Supply Company. Several staff were involved in the audit, all of whomhad attended the firm’s in-house training program on effective auditing methods.Throughout the audit, Yost spent most of her time in the field planning the audit,supervising the staff, and reviewing their work.A significant part of the audit entailed verifying the physical count, cost, and summarization of inventory. Inventory was highly significant to the financial statements, and Yostknew the inventory was pledged as collateral for a large loan to First City National Bank.In reviewing Stuart’s inventory count procedures, Yost told the president she believedthe method of counting inventory at different locations on different days was highlyundesirable. The president stated that it was impractical to count all inventory on thesame day because of personnel shortages and customer preference. After considerablediscussion, Yost agreed to permit the…
Johnny Kang, CPA, is the auditor of the Felix Lee Ltd. Johnny Kang, CPA is considering the audit work to be performed in the accounts payable area for the current year’s engagement. The prior year papers show that confirmation requests were mailed to one hundred of the client’s one thousand suppliers. The selected suppliers were based on Johnny Kang’s sampling, which was designed to select high value items in the accounts payable balance. Johnny Kang and Felix Lee Ltd.’s accountant, DY Anderson spent substantial number of hours resolving relatively minor differences between the confirmation replies and accounting records. Alternative audit procedures were used for those suppliers who did not respond to the confirmation requests.
Required:1. Identify the accounts payable assertions that Johnny Kang must consider in determining the substantive tests to be followed.
2. Identify situations for which Johnny Kang should use accounts payable confirmations and discuss whether he is required to…
Chapter 5 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - Prob. 8RQCh. 5 - Prob. 9RQCh. 5 - Prob. 10RQ
Ch. 5 - What potential sanctions does the SEC have against...Ch. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14.1MCQCh. 5 - Prob. 14.2MCQCh. 5 - Prob. 14.3MCQCh. 5 - Prob. 15.1MCQCh. 5 - Prob. 15.2MCQCh. 5 - Prob. 15.3MCQCh. 5 - Prob. 16.1MCQCh. 5 - Prob. 16.2MCQCh. 5 - Prob. 16.3MCQCh. 5 - Prob. 17DQPCh. 5 - Prob. 18DQPCh. 5 - Prob. 19DQPCh. 5 - Prob. 20DQPCh. 5 - Prob. 21DQPCh. 5 - Prob. 22DQPCh. 5 - Prob. 23DQPCh. 5 - Under Section 11 of the Securities Act of 1933 and...Ch. 5 - Prob. 25DQPCh. 5 - Prob. 26DQPCh. 5 - Prob. 27C
Knowledge Booster
Similar questions
- Read the given cases. Then, identify the most applicable technique of gathering evidence in each case. 1. Anna Santos audited the information system of Flores Corporation. Upon her evidence collection, she wanted to verify if the management assumes full responsibility for formulating, developing, documenting, promulgating, and controlling policies covering general aims and directives. 2. Veronica is the information systems (IS) auditor of Puno Corporation. In the execution of the audit, Veronica wants to know how the controls are established in the departments within the organization. Specifically, she wants to know how responsibilities are segregated in each department. 3. Brylle is one of the auditors of Alejandria Corporation (AC). He was assigned to test the controls over the cash of Alejandria. The accountant of AC prepares monthly bank reconciliation through the use of Microsoft Excel. Brylle wanted to know if the final amounts in the bank reconciliation are correct…arrow_forwardJohn Josephs an audit manager for Tip, Acanoe & Tylerto, was asked to speak at a dinner meeting of the local Small Business Administration Association. The president of the association has suggested that he talk about the various phases of the audit process. John has asked you, his trusted assistant, to prepare an outline for his speech. He suggests that you answer the following. Required: A) List and describe the various phases of an audit. B) Describe how audit procedures designed for one purpose might provide evidence for other purposes. Give an example. C) One of the phases involves understanding an entity's internal control. Why might the members of the association be particulary interested in the work conducted by auditors in this phase of the audit?arrow_forwardA staff auditor had just begun work and was assigned to a client that her supervisor, a senior auditor, had worked for many years. Her supervisor assigned her to this client and sent an email welcoming her to the client and providing details and files regarding the client. Among the information included in the email was the client's general ledger, her expected work hours during the busy season, and her assigned audit sections. The supervisors of the new staff auditor requested a meeting to get her acquainted with the position and answer any questions she may have. What questions should the staff auditor ask her supervisor, a senior auditor who has worked for her assigned client for many years?arrow_forward
- Blake and Caroline, two audit managers assigned to the audit of Legolas Enterprises are discussing samples and sample sizes in conjunction with the audit of the client's system of internal control. Blake mentions that back in college when he took an auditing class, he recalled the professor saying that audit sample size was tied to the level of assurance that the auditor ultimately wished to obtain. Which of the following responses by Caroline is most likely to help Blake understand this connection? O The professor was mistaken. There really isn't any relationship between the level of assurance the auditor wishes to obtain and the sample sizes used in an audit. O Although there is a definite relationship between desired level of assurance and sample size, most auditors simply audit the population of interest when they wish to increase the desired level of assurance. O Generally speaking, if an auditor wishes to increase the desired level of assurance, he or she will typically increase…arrow_forwardYou were recently hired by the CPA firm Honson & Hansen. Before you start working, the firm requires that you participate in the first-year staff training course. The instructor asks you to prepare answers for the following questions: a. How is audit evidence defined? b. How is the collection of audit evidence related to management assertions? c. What are the two key characteristics of audit evidence that an auditor must consider when evaluating the quality of the evidence? Describe the meaning of each of these characteristics in the context of auditing.arrow_forwardYou have been employed Arens & Elder CPA for many years. As a training officer for the firm, part of your responsibility include training new staff before they are sent out on an initial audit job. Three new members of staff are expected to work on the audit of Flemings Limited. Your training of these new staff members will focus on management assertions and audit procedures. The following are various management assertions (1 through 10), made by Flemings, that are related to their sales and accounts receivable. i. All sales transactions have been recorded. ii. Receivables are appropriately classified as to trade and other receivables in the financial statements and are clearly described. iii. Accounts receivable are recorded at the correct amounts. iv. Sales transactions have been recorded in the proper period. v. Sales transactions have been recorded in the appropriate accounts. vi. All required disclosures about sales and receivables have been made. vii. All…arrow_forward
- During the most recent year's audit of Hoover Enterprises, senior management has advised the auditors that a new and more effective system of internal control has been designed and implemented by external consultants and the internal audit function. As a result of this information, what approach might the auditing firm take with respect to internal control? O The external auditors will be required to obtain written assurances from senior management, documenting the effectiveness of the new system of internal control, for inclusion in the audit file. O The auditor is likely to proceed with testing of the new controls, and if the new system is determined to be robust and effective, the auditor will issue a qualified opinion on internal control. O The auditor may presume that their previous understanding of internal control is no longer valid, and will likely amend audit procedures to document the effectiveness of the new system. O The external auditors will focus the audit time and…arrow_forwardA division of your company purchased a large quantity of new desktop computers during the current fiscal year. An internal audit manager has asked you to audit the process used to acquire the computers. He also wants you to determine whether the computers have been used properly and accounted for correctly. The manager specified a set of audit objectives to guide your tests. For example, he wants you to determine whether: (1) The purchases of the computers were properly authorized. (2) Responsibilities regarding the computers were properly segregated. (3) The computers, as well as the software and information they contain, are properly safeguarded. Consider both physical and logical access。 (4) Laws and regulations regarding software usage have been complied with. (5) The computers recorded as being purchased actually exist. (6) All of the computers that were purchased have been recorded. (7) The amounts at which the computers are recorded are correct. (8) The estimated useful lives…arrow_forwardSaleha was recently hired by the accounting firm of Haron & Associates. After two weeks of joining the firm, Saleha was sent to the first-year staff training course. The instructor asked her to prepare answers for the following questions:a. Briefly explain the definition of Audit Evidence.b. How does evidence relate to assertions and to the audit report?c. What are the characteristics of evidence should an auditor be concerned with when searching for and evaluating evidence? d.List and explain the objective and benefits of financial statement audit.arrow_forward
- 1) You are the partner responsible for quality control in Suta Excellence, A well-known audit firm. You are reviewing the findings from a recent post-issuance (cold) review performed by your firm's compliance department. The following were identified on a number of audits: Zhetta Company. A review of working papers found that some working papers had not been signed off by the team member that had completed the work. Some working papers were not dated, and some did not have a signature confirming they had not been reviewed. Petra Company A mandatory procedure included in the audit plan which required a written representation letter to be obtained, had not been completed. A comment had been added by the audit manager stating that there were no issues requiring a written representation from management. Jantra Company. An audit test over purchases required a sample of 60 invoices to be tested. 54 had been tested and found to be recorded accurately and completely. Six (6) invoices could not…arrow_forwardYou are auditing a client that supplies electrical products to retail stores and electrical contractors throughout the country.The client keeps its accounts receivable records on a computer system, which is updated at the end of each business day.You plan to audit accounts receivable balance as at the end of the financial year, and you have a generalised audit software (GAS) package available to help in this task.Required:Identify ten (10) substantive audit procedures that you could perform using generalised audit software (GAS) in relation to auditing the accounts receivable account.arrow_forwardIn reviewing the processes, procedures, and internal controls of one of your audit clients, VeronicaCorporation, you notice the following practices in place. Veronica has recently installed a new electronicdata processing (EDP) system that affects the accounts receivable, billing, and shipping records. Thecompany identified a computer operator who is permanently assigned to each of the functions ofaccounts receivable, billing, and shipping. Each of these computer operators is given the responsibilityof running the program for transaction processing, making program changes, and reconciling thecomputer log. To prevent an operator from having exclusive access to the tapes and documentation,the computer operators randomly rotate the custody and control tasks every two (2) weeks over themagnetic tapes and the system documentation. Access controls to the computer room consist ofmagnetic cards and a digital code for each operator. Moreover, the system analyst and the computeroperation…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning