Concept Introduction:The objective of this analysis is to analyse the risks to financial reporting that is associated with the inadequacy of segregation of duties and that may lead the organization towards increased risks as they may have to undergo fraudulent activities.
Requirement 1
The risks to financial reporting that is associated with the inadequacy of segregation of duties.
b
Concept Introduction:The objective of this analysis is to analyse the risks to financial reporting caused by the other controls that might mitigate the segregation of dutiesand that may lead the organization towards increased risks as they may have to undergo fraudulent activities.
Requirement 2
To explain:Other controls that might mitigate the segregation of duties.
Concept Introduction:The objective of this analysis is to analyse the possible tests of controls for mitigating controls that may lead the organization towards minimized risks as they have set relevant controls to avoid fraudulent activities.
Requirement 3
Possible tests of controls for mitigating controls.
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Chapter 5 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
- Assume that management is gathering evidence as part of its process for assessing the effectiveness of internal control over financial reporting. The company is a manufacturer of high-dollar specialized Control Tested machines used in the medical profession. The following table identifies important controls that management is testing regarding accounts related to revenue recognition, accounts receivable, and other sales related activities. The first column describes the control, and the second column describes the test results. Based on the test results, determine the conclusion that management should likely make about the deficiency. (Is it a control deficiency, a significant deficiency, or a material weakness?)arrow_forwardnternal control does not consist of policies and procedures that Select one: a. Ensure that business information is accurate b. Protect assets from misuse c. Guarantee the company will earn a profit d. Ensure employees and managers comply with laws and regulationsarrow_forwardWhich of the following is desirable in a good system of internal accounting controls? Select one: O O O a. Develop plans and budgets b. Encourage employee collusion c. Maintain adequate accounting records d. Two of the above e. None of the abovearrow_forward
- 33) Which threat may occur when, because of a close relationship, a professional accountant becomes too sympathetic to the interests of others? a) Self-interest threats b) Advocacy threats c) Familiarity threats d) Self-review threatsarrow_forwardWhich one of the following is not an objective of a system of internal controls? Select one: 1. Overstate liabilities in order to be conservative 2. Enhance the accuracy and reliability of accounting records 3. Safeguard company assets 4. Reduce the risks of errorsarrow_forwardWhich of the following statements regarding flaws suffered by financial measures is not correct?A)They are hard to quantify.B)They do little to motivate employees to improve accounting profits.C)They are not effective in getting managers' attention.D)They are useful in identifying operational problems.E)None of the above.arrow_forward
- Segregation of Duties (SOD) is a basic building block of sustainable risk management and internal controls for a business. Which of the following statements is not a segregation of duties violation?A. The duties of Internal IT Developer of company is to write application programs and then perform required program maintenance when a problem occurs.B. The payroll administrator is distributing payroll checks to employees and recording cash receipts in the journal under supervision.C. The accounting clerk who recording cash receipts in the journal in the general ledger performs bank reconciliation to compare if there are any differences between cash transactions.D. The inventory warehouse clerk task is to maintain the inventory records with custody of physical assets inventory to manage asset identification, location and condition Explain why you choose your answer, and not the other (in max 200 words)arrow_forwardWhich of the following is true of internal control? A. Internal control procedures tend to diminish the importance of operational efficiency. B. A company's outside auditor is responsible for the company's internal control system. C. Internal controls are only necessary for public companies. D. One of the major purposes of internal control is to ensure that the assets are safeguarded.arrow_forwardWhich of the following is false about accounting information systems?A. They provide reports that people analyze.B. They prevent errors and stop employees from stealing inventory.C. They are designed to gather data about the company’s transactions.D. They consist of processes that involve input of data from source documents, processing, output, andstorage.arrow_forward
- Which of the following is false about accounting information systems? A. They provide reports that people analyze. B. They prevent errors and stop employees from stealing inventory. C. They are designed to gather data about the companys transactions. D. They consist of processes that involve input of data from source documents, processing, output, and storage.arrow_forwardIs there a way to prevent managers from focusing on accounting measures as performance measures?arrow_forward1. What is the external information source that is commonly used? A) Previous Financial record B) Benchmark from Market research C) Timesheet of the company employees 2. Passwords and firewalls are used to ensure the security of highly confidential information that is not for external users. A) True B) False 3. The production and sale plans for business may be liming by a limiting factor or Scarce resources. That could be due to limits of: A) Materials B) Machine hours C) A and B 4. "The increase in value would be created by having available one additional unit of a limiting resource at the original cost" is: A) Demand price B) Shadow price C) None of the above 5. The following statements have been made about rolling budgeting: 1) Keep updating the budgeting by adding further an accounting period when the earlier has expired. 2) The variants of the budget are not adjusted to reflect actual levels. Which of the above statements is/are true? A) Only 1 B) 1 and 2 C) None of the abovearrow_forward
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