accountant reviews the report from the internal audit function that ensures the company's internal controls and riskmanagement policies are functioning properly. According to report, there were discrepancies in the internal controls thatare not in conformance with the organizational policy and applicable law. The accountant suspects that the CEO ispezzling approximately $30,000 per quarter. What should the accountant do about this discrepancy? te accountant failsto act on this issue, what standard according to the IMA Statement of Ethical Professifal Practice does the accountantviolate? the toolbar, press ALT + F10 (PC) or ALT + FN + F10 (Mac).

Step 1:Gather Evidence and Documentation: The accountant should gather all available evidence…

Answered: accountant reviews the report from the…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter5: Professional Auditing Standards And The Audit Opinion Formulation Process

Section: Chapter Questions

Problem 40RQSC

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Read the following scenario about Strang Corporation and identify the substantive procedures that the CPA (Elaine Stanley) should perform to determine whether lapping exists. Do not discuss deficiencies in the system of internal control. During the year, Strang Corporation began to encounter cash flow difficulties, and a cursory review by management revealed receivable collection problems. Strang’s management engaged Elaine Stan ley, CPA, to perform a special investigation. Stanley studied the billing and collection cycle and noted the following: The accounting department employs one bookkeeper who receives and opens all incoming mail. This bookkeeper is also responsible for depositing receipts, filing daily remittance advices, recording receipts in the cash receipts journal, and posting receipts in the individual customer accounts and the general ledger accounts. There are no cash sales. The bookkeeper prepares and controls the mailing of monthly statements to customers. The concentration of functions and the receivable collection problems caused Stanley to suspect that a systematic theft of customers’ payments through a delayed posting of remittances (lapping of accounts receivable) is present.
The external auditor of a company has certain requirements due to Sarbanes-Oxley. Which of the following best describes these requirements? A. The auditor is required to only report weaknesses in the internal control design of the company he or she is auditing. B. The auditor must issue an internal control report on the evaluation of internal controls overseen by the Public Company Accounting Oversight Board C. The auditor in charge can serve for a period of only two years. D. The Public Company Accounting Oversight Board reviews reports submitted by the auditors when no evaluations have been performed.
An IT auditor is conducting data analysis procedures on an employee expense report file and notices several expenses for $24.99 from the same individual. The company’s policy requires that any expenses that are under $25.00 do not require a receipt. The IT auditor should: [SELECT ALL THAT APPLY a) Maintain professional skepticism and investigate these transactions further b) Pass on investigating these items further, focusing on higher dollar amounts c) Evaluate the business process approval controls, and related procedures d) Discuss fraud awareness and detection programs with management to gain an understanding of management’s commitment to fraud prevention and related entity-level anti-fraud controls.
Which of the following statements would most likely appear in an auditor's engagement letter? a. Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket expenses. b. The auditor's preliminary assessment of the risk factors relating to misstatements arising from fraudulent financial reporting. c. A reminder that management is responsible for illegal acts committed by employees. d. After performing our preliminary analytical procedures, we will discuss with you the other procedures we consider necessary to complete the engagement. e. Required evidence is needed to issue a qualified opinion.
Which of the following is NOT an implication of Section 302 of SOX?a. Auditors must determine whether changes in internal control have materially affected, or are likely to materially affect, internal control over financial reporting.b. Auditors must interview management regarding significant changes in the design or operation of internal control that occurred since the last audit.c. Corporate management (including the CEO) must certify monthly and annually their organization’s internal controls over financial reporting.d. Management must disclose any material changes in the company’s internal controls that have occurred during the most recent fiscal quarter.
Rationalization for fraud can fall under two categories: “no harm” and “no responsibility.” Assume an employee is directed by management to reduce recorded expenses at year-end by insignificant amounts individually, but which are material in total. How might the employee justify her actions if questioned by the auditor with respect to no harm and no responsibility? What stage of moral development in Kohlberg’s model is best illustrated by the employee’s actions? Why?
PCAOB standards are used to conduct the audit for public companies. * True False If an auditor assigns a tolerable misstatement of $1,000 to accounts payable, he or she would need to obtain less audit evidence for that account than if $100,000 had been assigned. * True False An engagement letter establishes a clear understanding of the terms of the engagement between the client and the auditor. * True False
KPMG is the auditor for a company under IESBA rules and cannot assume a management responsibility for the company. Which option below is NOT a management responsibility? 1)Presenting a report to a client’s board on behalf of management. 2)Benchmarking employee salaries against industry and market averages. 3)Monitoring internal controls for the company’s financial reporting. 4)Deciding which recommendations from another 3rd party to implement.
If the auditor is auditing a public company in the United States and must report on internal controls over financial reporting (ICFR), the identification of one or more material weaknesses _______. A. will result in the auditor issuing an adverse opinion on the financial statements and the CFO/CEO will probably go to jail B. will result in an adverse opinion on ICFR C. will result in an unmodified opinion on ICFR D. will result in the auditor issuing a disclaimer of opinion on the financial statements and the CFO/CEO will probably go to jail
For Questions 21 through 30, assume that you are reporting on an audit of a client’s financial statements. Select the type(s) of opinion appropriate for the scenario. In addition, unless stated otherwise, assume the matter involved is material. If the problem does not tell you whether a misstatement pervasively misstates the financial statements or does not list a characteristic that indicates pervasiveness, two reports may be possible. A company has not followed generally accepted accounting principles in the recording of its leases. Question 21 options: Qualified Adverse Disclaimer Qualified or adverse A client changed its depreciation method for production equipment from the straight-line method to the units-of-production method based on hours of utilization. The auditor concurs with the change. Question 22 options: Unmodified – standard Unmodified with…
Each of the following statements is a communication from management. Indicate whether the inclusion of each statement in written representations is appropriate. Provide your rationale for any statements whose inclusion in written representations is not appropriate.a. “Certain representations in this letter are described as being limited to matters that are material.”b. “No frauds involving management, employees who have significant roles in internal control, or other frauds that could have a material effect on the financial statements have occurred during the year under audit.”c. “Based on our assessment, we conclude that the Company has maintained an effective internal control over financial reporting as of December 31, 2017.” d. “We have prepared a description and evaluation of certain contingencies for which our attorneys have devoted substantive attention on our behalf in the form of legal representation.”e. “There are no significant deficiencies, including material weaknesses, in…
When employees have a conflict of interest between their personal compensation and provision of truthful financial statements to shareholders, the securities regulator, such as the Securities Exchange Commission, should shut down such financial companies. the external auditors should take the word of the employees and the management about the value of such securities. the accounting standards' supervisory board should be required to audit such financial companies. the board of directors should approve clear policy guidelines and monitor their enforcement to combat such conflicts. CO

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