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Give an example of a physical control the client can use to protect the asset or record.
Explain what is meant by independent checks on performance and give five specific examples.
Distinguish the auditor's responsibility for testing controls in an integrated audit of a public company from the responsibility to test controls in an audit.
Distinguish a significant deficiency in internal control from a material weakness in internal control.
Frank James, a highly competent employee of Brinkwater Sales Corporation, had been responsible for accounting-related matters for two decades.
Jeanne Maier, CPA, believes that it is appropriate to obtain an understanding of internal control about halfway through the audit, after she is familiar.
Describe the concept of an integrated audit of the financial statements and internal control required by PCAOB standards.
The auditor's risk assessment procedures identified several risks that the auditor deems to be significant risks.
What two conditions must be present for the auditor to issue an unqualified opinion on internal control over financial reporting?
The company has an organizational chart that establishes the formal lines of reporting and authorization protocols.
All payroll payments must have a valid employee identification number assigned by the human resources department at the time of hiring.
For each internal control, identify a specific misstatement that is likely to be prevented if the control exists and is effective.
A vendor invoice was paid even though no merchandise was ever received. The accounts payable software application does not require the input of a valid .
Reconcile the accounts receivable master file with the control account and review accounts outstanding more than 90 days.
Describe what additional procedures Pherson must perform if auditing the financial statements of a public company.
How would you improve internal controls for each of the three companies?
The auditor identified a material misstatement in the financial statements that was not detected by management of the company.
For each cash receipts transaction-related audit objective, identify one or more existing controls.
e. What information is provided to help readers understand why management arrived at that conclusion?
Define misappropriation of assets and give two examples of misappropriation of assets.
Give examples of risk factors for misappropriation of assets for each of the three fraud conditions: incentives/pressures, opportunities, and attitudes.
Auditors are required to make inquiries of individuals in the company when gathering information to assess fraud risk.
The two components of professional skepticism are a questioning mind and a critical assessment of the audit evidence.
Discuss the importance of the control environment, or "setting the tone at the top," in establishing a culture of honesty and integrity in a company.
What three auditor actions are required to address the potential for management override of controls?