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TASK Below are 10 independent risk factors: 1. The client is one of the industry’s largest based on its size and market share. 2. The company is publicly traded. 3. The client fails to reconcile bank accounts to recorded cash balances. 4. The audit program omits several necessary audit procedures. 5. The allowance for doubtful […]
DISCUSSION QUESTIONS AND PROBLEMS The following are concepts discussed in Chapter 8 and this chapter: 1. Preliminary judgment about materiality7. Estimated total misstatement in a segment 2. Control risk 8. Planned detection risk 3. Risk of fraud 9. Estimate of the combined misstatement 4. Inherent risk 10. Significant risk 5. Risk of material misstatements 11. […]
QUESTIONSThe following questions concern auditor responsibilities related to the assessment of risks of material misstatement. Choose the best response.a. Which of the following procedures would a CPA most likely perform during the planning stage of the audit?(1) Evaluate the reasonableness of management’s allowance for doubtful accounts.(2) Determine areas where there is a higher risk of […]
ASSESSING THE RISK OF MATERIAL MISSTATEMENT Define risk in auditing.Distinguish the different types of risk assessment procedures. Understand important auditor considerations related to the risk of material misstatement due to fraud.Describe the auditor’s responsibility to identify significant risks. Describe the audit risk model and its components.Assess acceptable audit risk.Consider the impact of several factors on the assessment […]
CASE Winston Black was an audit partner in the firm of Henson, Davis & Company. He was in the process of reviewing the audit files for the audit of a new cli- ent, McMullan Resources. McMullan was in the business of heavy construction. Black was conducting his first review after the audit was substantially complete. […]
TASK This problem requires the use of ACL software, which can be accessed through the textbook website. Information about downloading and using ACL and the commands used in this problem can also be found on the textbook web- site. You should read all of the reference material preceding the instructions about “Quick Sort” before locating […]
TASK 8-32 (OBJECTIVE 8-4) In the audit of the Worldwide Wholesale Company, you did extensiveratio and trend analysis as part of preliminary audit planning. Your analytical proceduresidentified the following: 1. Commission expense as a percent of sales was constant for several years but has in-creased significantly in the current year. Commission rates have not changed. […]
MULTIPLE CHOICE QUESTIONS FROM BECKER CPA EXAM REVIEW 8-26 (OBJECTIVES 8-1, 8-2, 8-6) The following questions deal with client acceptance, audit planning, and materiality. Choose the best response. a. In which of the following circumstances would an auditor of an issuer be least likely to reevaluate established materiality levels?(1) The materiality level was established based […]
MULTIPLE CHOICE QUESTIONS FROM CPA EXAMINATIONS 8-23 (OBJECTIVES 8-1, 8-3, 8-4) The following questions concern the planning of the engagement. Select the best response. a. Analytical procedures used in planning an audit should focus on identifying (1) material weaknesses in internal control. (2) the predictability of financial data from individual transactions. (3) the various assertions […]
MULTIPLE CHOICE QUESTIONS FROM CPA EXAMINATIONS 8-23 (OBJECTIVES 8-1, 8-3, 8-4) The following questions concern the planning of the engagement. Select the best response. a. Analytical procedures used in planning an audit should focus on identifying(1) material weaknesses in internal control.(2) the predictability of financial data from individual transactions.(3) the various assertions that are embodied […]
