02 Jan If auditors perform audit

ACCT444 Week 1 Discussion Latest 2017 August

WEEK 1: COMPARE AND CONTRAST STANDARDS

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Let’s begin our discussion by identifying what the differences and similarities are, in audits of financial statements, compliance audits, and operational audits.

ACCT444 Week 2 Discussion Latest 2017 August

WEEK 2: BASIS OF CLAIMS AGAINST AUDITORS

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Please review Case 5-27, Part 1 (Whitlow & Company) in your textbook.

Based on the facts outlined in the case, what liability, if any, does Mitchell & Moss have if Thaxton brought suit based on the Securities Exchange Act of 1934?

ACCT444 Week 3 Discussion Latest 2017 August

WEEK 3: AUDIT EVIDENCE

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Please review Case 7-38 (Grande Stores) in your textbook.

Identify the management assertions related to each of the fictitious supplier credits and unrecorded amounts in accounts payable using the facts presented.

ACCT444 Week 4 Discussion Latest 2017 August

WEEK 4: EVALUATING INTERNAL CONTROLS

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Please review Case 10-42 (Lady’s Fashion Fair) in your textbook. What are the sales-related audit objectives relative to this client?

ACCT444 Week 5 Discussion Latest 2017 August

WEEK 5: THE AUDIT PROGRAM

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Please review Case 13-35 (Gale Brewer, CPA) in your textbook. In this case, we are going to find weaknesses in the design of an audit program. What are the major deficiencies in the audit, and why did they take place? Do you see any ethical issues with the auditor’s behavior?”

ACCT444 Week 6 Discussion Latest 2017 August

WEEK 6: AUDIT OF SALES

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Please review Case 16-34 (Smalltown Regional Hospital) in your textbook.

In this case, we are auditing the sales and collection cycle of a nonprofit hospital. Just because it is a nonprofit organization, that does not eliminate the need for the auditors to assess risk. What are the major factors affecting client business risk and acceptable audit risk for this audit?

ACCT444 Week 7 Discussion Latest 2017 August

WEEK 7: SMACKEY DOG FOOD

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This week, we will be using the You Decide Activity (located under its own tab this week) as a focus of this discussion topic. First, we will begin with a quick review of audit reports and what you learned from your eBook reading, course lecture, and Becker material. What five circumstances are required for a standard, unqualified opinion to be issued? Please respond to the You Decide Activity questions as requested by the instructor.

ACCT444 Week 1 Homework Latest 2017 August

Solve the following questions.

Chapter 1: 1–18

Chapter 2: 2–19

Chapter 4: 4–22 and

Chapter 26: 26-25

ACCT444 Week 2 Homework Latest 2017 August

Solve the following questions

Chapter 5: 5-23, 5-24

Chapter 6: 6-23, 6-27

Chapter 11: 11-30

ACCT444 Week 3 Homework Latest 2017 August

Solve the following questions

Chapter 7: 7-27, 7-30,7-31

Chapter 8: 8-22, 8-33

Chapter 9: 9-33

ACCT444 Week 4 Homework Latest 2017 August

Solve the following questions

Chapter 10: 10-33, 10-41

Chapter 12: 12-19, 12-26

ACCT444 Week 5 Homework Latest 2017 August

Solve the following questions

Chapter 13: 13-26, 13-30, 13-33

Chapter 14: 14-25, 14-26

ACCT444 Week 6 Homework Latest 2017 August

Solve the following questions

Chapter 15: 15-25, 15-26

Chapter 16: 16-25, 16-30

Chapter 17: 17-31

ACCT444 Week 7 Homework Latest 2017 August

Solve the following questions

Chapter 3: 3-27, 3-32

Chapter 24: 24-26, 24-28

Chapter 25: 25-22

ACCT444 Week 3 Course Project Latest 2017 August

Part 1—Problem 8-40 (Due Week 3, 20 points)

Part 1 requires your group to calculate and analyze ratios. To assist you, our firm uses a standard worksheet for common ratios; you can download a copy here (Links to an external site.) Links to an external site. The problem directs you to the publisher’s website; however, you may download the required files from the link above. You will also prepare a common-size income statement, using the information from the Excel worksheet named pinnacle financials, found in the zip file that you downloaded. You are asked to estimate potential misstatements, and your group should discuss methods for this estimate and the accounts that are at risk.

ACCT444 Week 4 Course Project Latest 2017 August

Part 2—Problem 9-37 (Due Week 4, 20 points)

Part 2 presents information that will help your team assess the business and audit risks associated with your audit. This evidence, together with your analysis from Part 1,will be the basis of your written risk assessment.You may wish to use a risk matrix similar to Figure 9-6 aspart of your presentation.The risk assessment should be presented as a memo to file.The memo should identify the users of thefinancial statement and their reliance on the financial statements, the likelihood of the client having financial difficulties, and the integrity of management. Next, your memo will establish the acceptable audit risk as low, medium, or high, with a justification for your selection. The memo should then address the inherent risk and the associated account(s) with each of the 11 situations discussed in the problem.

Part 3—Problem 10-43 (Due Week 4, 20 points)

This part of the project requires your team to review the internal control flowchart presented in the case to identify the existing internal controls over the acquisition and payment cycle. You will then identify weaknesses, if any, in those controls and assess the control risks that the weaknesses present. Your team will then complete the control risk matrices workpaper included in the zip file downloaded from the above link. A model of this worksheet is presented on page 309 for a sales cycle audit.

ACCT444 Week 5 Course Project Latest 2017 August

Part 4—Problem 11-34 (Due Week 5, 20 points)

In this part, you will have an opportunity to participate in brainstorming related to fraud as part of the audit planning stage. The purpose of this part is to identify risks and to address those risks in the audit.

You will begin by using the fraud triangle and information from Parts 1 through 3 to identify incentives and pressures, opportunities, and attitudes and rationalizations. Then you will identify risks and accounts that will be affected. You will then look at revenue and identify at least two ways that fraud can happen and how you would find it in the audit.

You will finish up by looking back to Parts 1 and 2 and identifying fraud risks related to all areas covered there.

Part 5—Problem 14-34 (Due Week 5, 20 points)

This task requires your team to plan a phase of an audit around the internal controls that you identified in Part 3. You will use the worksheet contained in the zip file designated for this problem. For each control, you will complete columns for the transaction-related audit objective, list a test of controls, and a substantive test of transaction. Next, your team will list a substantive test of transaction for each of the audit-related objectives for the acquisition and cash disbursement cycle. These tests may or may not be included in the final program. At this step, we are matching tests to audit objectives, and our final selection of tests will be based on a final risk analysis. Your team will select those tests that will best meet the planned audit risk.

ACCT444 Week 6 Course Project Latest 2017 August

Part 6—Problem 15-35 (Due Week 6, 20 points)

Here, your team will complete the sampling data sheet included in the zip file. The planned audit variables are judgmental and should be decided upon as a team in your meeting area. For random selection using Excel, the command to select numbers randomly from the population is =RANDBETWEEN(4614, 31612)

The command for selecting the random number can be entered directly onto the spreadsheet, or can be selected from the function menu (math and trig) under the insert menu. It may be necessary to add the analysis tool pack to access the RANDBETWEEN function.

The final step is to use the data presented in D to complete theactual resultssection of the acquisition schedule. Note: You will not be completing the cash disbursement section of actual results.

ACCT444 Week 7 Course Project Latest 2017 August

Part 7—Problem 16-35 (Due Week 7, 20 points)

Your final tasks of the project will be will consist of a professional and entertaining presentation (narrated PowerPoint) that will be delivered using some form of participative technology (VoiceThread, Cisco Spark). The presentation will begin a recap of prior week’s problems and continue with Week 7. Week 7 will begin with the depiction of the performance of analytical procedures in accounts payable. The team will next design tests of details of balances in accounts payable. The problem then presents your team with the results of testing in Sections D, E, and F. You will use this information to complete the worksheet for this problem included in the zip file. You will calculate an estimated error. Again, the team must make a judgement on the amount to include as an estimate of sampling error. The presentation should conclude with the fairness of the accounts payable balance.

ACCT444 Week 1 Quiz Latest 2017 August

Question 1

3 / 3 pts

(TCO 3) The organization that is responsible for providing oversight for auditors of public companies is called the _____

Auditing Standards Board.

American Institution of Public Accountants.

Accounting Oversight Board.

Public Company Accounting Oversight Board.

Question 2

3 / 3 pts

(TCO 1) Standards issued by the Public Company Accounting Oversight Board must be followed by CPAs who audit _____

both private and public companies.

public companies only.

private companies, public companies, and nonprofit entities.

private companies only.

Question 3

3 / 3 pts

(TCO 1) Which of the following actions should a CPA firm take to comply with the AICPA’s quality control standards?

Establish procedures that comply with the standards of the Sarbanes-Oxley Act.

Use attributes sampling techniques in testing internal controls.

Consider inherent risk and control risk before determining detection risk.

Establish policies to ensure that the audit work meets applicable professional standards.

Question 4

3 / 3 pts

(TCO 1) Any service that requires a CPA firm to issue a report about the reliability of an assertion that is made by another party is a(n) _____

accounting and bookkeeping service.

attestation service.

assurance service.

tax service.

Question 5

3 / 3 pts

(TCO 1) Jackson & Company, CPAs, plan to audit the financial statements of Perigee Technologies, an issuer as defined under the Sarbanes-Oxley Act of 2002. Which of the following situations would impair Jackson’s independence?

Provision of personal tax services to Johnson, the accounts payable manager of Perigee

Preparation of Perigee’s routine annual tax return, where Jackson’s fee will be calculated as a percentage of the tax refund obtained

Audit of Perigee’s internal control is performed contemporaneously with the annual financial statement audit

Discovering that Lowe, the chief financial officer of Perigee, started his accounting career 10 years earlier as a staff accountant for Jackson & Company and continues to maintain ties with current partners at the firm

ACCT444 Week 2 Quiz Latest 2017 August

Question 1

3 / 3 pts

(TCO 4) In connection with the audit of financial statements, an independent auditor could be responsible for failure to detect a material fraud if

statistical sampling techniques were not used on the audit engagement.

the auditor planned the audit in a negligent manner.

accountants performing important parts of the work failed to discover a close relationship between the treasurer and the cashier.

the fraud was perpetrated by one employee who circumvented the existing internal controls.

Question 2

3 / 3 pts

(TCO 4) “Absence of reasonable care that can be expected of a person is a set of circumstances” defines

pecuniary negligence.

gross negligence.

extreme negligence.

ordinary negligence.

Question 3

3 / 3 pts

(TCO 4) The prudent person concept establishes that

the CPA firm is not expected to make only perfect judgments.

an audit in accordance with GAAS is subject to limitations and cannot be relied upon for complete assurance that all errors and irregularities will be found.

the courts do not require that the auditor become the insurer or guarantor of the accuracy of the statements.

all three of the above are true.

Question 4

3 / 3 pts

(TCO 4) Tort actions against CPAs are more common than breach of contract actions because

there are more torts than contracts.

the burden of proof is on the auditor rather than on the person suing.

the person suing need prove only negligence.

the amounts recoverable are normally larger.

Question 5

3 / 3 pts

(TCO 4) If the auditor believes that the financial statements are not fairly stated or is unable to reach a conclusion because of insufficient evidence, the auditor

should withdraw from the engagement.

should request an increase in audit fees so that more resources can be used to conduct the audit.

has the responsibility of notifying financial statement users through the auditor’s report.

should notify regulators of the circumstances.

ACCT444 Week 3 Quiz Latest 2017 August

Question 1

3 / 3 pts

(TCO 6) Physical examination is the inspection or count by the auditor of items such as

cash or inventory only.

cash, inventory, canceled checks, and sales documents.

cash, inventory, canceled checks, and tangible fixed assets.

cash, inventory, securities, notes receivable, and tangible fixed assets.

Question 2

0 / 3 pts

(TCO 6) Analytical procedures are

diagnostic tests of financial information that may not be classified as evidential matter.

calculations of financial information made by a computer.

substantive tests of financial information made by a study and comparison of relationships among data.

statistical tests of financial information designed to identify areas requiring intensive investigation.

Question 3

3 / 3 pts

(TCO 6) The Auditing Standards Board has concluded that analytical procedures are so important that they are required during

planning and testing phases.

planning and completion phases.

testing and completion phases.

planning, testing, and completion phases.

Question 4

3 / 3 pts

(TCO 6) Traditionally, confirmations are used to verify

individual transactions between organizations, such as sales transactions.

bank balances and accounts receivables.

fixed asset additions.

All of the above

Question 5

3 / 3 pts

(TCO 7) Analytical procedures used in planning an audit should focus on identifying

material weaknesses of internal control.

the predictability of financial data from individual transactions.

the various assertions that are embodied in the financial statements.

areas that may represent specific risks relevant to the audit.

ACCT444 Week 4 Quiz Latest 2017 August

Question 1

3 / 3 pts

(TCO 5) Which of the following is responsible for establishing a private company’s internal control?

Management

Auditors

Management and auditors

Committee of Sponsoring Organizations

Question 2

3 / 3 pts

(TCO 5) Which section of the Sarbanes-Oxley Act requires management to issue an internal control report?

202

203

404

408

Question 3

3 / 3 pts

(TCO 5) Which of management’s concerns with respect to implementing internal controls is the auditor primarily concerned?

Efficiency of operations

Reliability of financial reporting

Effectiveness of operations

Compliance with applicable laws and regulations

Question 4

3 / 3 pts

(TCO 5) Even with the most effectively designed internal control, the auditor must obtain audit evidence, beyond testing the controls, for every

transaction.

financial statement account.

material financial statement account.

financial statement account that will be relied upon by third parties.

Question 5

3 / 3 pts

(TCO 5) Which of the following is correct?

A significant deficiency is always a material weakness.

A reportable condition is always a material weakness.

A material weakness is less significant that a control deficiency.

A significant deficiency may be a material weakness.

ACCT444 Week 5 Quiz Latest 2017 August

Question 1

3 / 3 pts

(TCO 6) The auditor looks for an indication on duplicate sales invoices to see whether the invoices have been verified. This is an example of

a test of details of balances.

a test of control.

a substantive test of transactions.

both a test of control and a substantive test of transactions.

Question 2

3 / 3 pts

(TCO 6) Analytical procedures are defined in the auditing standards as

compliance tests.

substantive tests.

tests of controls.

helpful procedures not possessing the validity of other tests available to the auditor.

Question 3

3 / 3 pts

(TCO 6) Which of the following audit tests is usually the most costly to perform?

Analytical procedures

Tests of controls

Tests of balances

Substantive tests of transactions

Question 4

3 / 3 pts

(TCO 6) Which of the following represents an incorrect pairing of a type of audit test and evidence?

Procedures to obtain an understanding of internal controls—documentation

Analytical procedures—ratio analysis

Substantive tests of transactions—confirmation

Tests of details of balances—physical examination

Question 5

3 / 3 pts

(TCO 6) The purpose of tests of controls is to provide reasonable assurance that the

accounting treatment of transactions and balances is valid and proper.

internal control procedures are functioning as intended.

entity has complied with GAAP disclosure requirements.

entity has complied with requirements of quality control.

ACCT444 Week 6 Quiz Latest 2017 August

Question 1

3 / 3 pts

(TCO 9) The exception rate the auditor will permit in the population and still be willing to reduce the assessed level of control risk is called the

tolerable exception rate.

estimated population exception rate.

acceptable risk of overreliance.

sample exception rate.

Question 2

3 / 3 pts

(TCO 9) A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a

random sample.

statistical sample.

judgment sample.

representative sample.

Question 3

3 / 3 pts

(TCO 9) To determine if a sample is truly representative, an auditor must

conduct multiple samples of the same population.

never use sampling because of the expense involved.

audit the entire population.

perform none of the above.

Question 4

3 / 3 pts

(TCO 9) The most important aspect of evaluating the client’s method of obtaining a reliable cutoff is to

perform extensive detailed testing of cutoff.

evaluate the client’s control procedures around cutoff.

confirm a sample of transactions near period end with customers.

perform any of the above.

ACCT444 Week 7 Quiz Latest 2017 August

Question 1

3 / 3 pts

(TCO 2) When a misstatement in the financial statements exists, but is unlikely to affect the decisions of a reasonable user, it would be appropriate to issue

an unqualified opinion.

a qualified opinion.

an adverse opinion.

a disclaimer of opinion.

Question 2

0 / 3 pts

(TCO 2) Under which of the following sets of circumstances should an auditor issue a qualified opinion?

The financial statements contain a departure from generally accepted accounting principles, the effect of which is material.

The principal auditor decides to make reference to the report of another auditor who audited a subsidiary.

There has been a material change between periods in the method of the application of accounting principles.

There are significant uncertainties affecting the financial statements.

Question 3

3 / 3 pts

(TCO 2) An auditor who is unable to form an opinion on a new client’s opening inventory balances may issue an unmodified opinion on the current year’s:

Income statement only.

Statement of cash flows only.

Balance sheet only.

Statement of shareholders’ equity only.

Question 4

3 / 3 pts

(TCO 2) Comparative financial statements include the financial statements of the prior year that were audited by a predecessor auditor whose report is not presented. If the predecessor’s report was qualified, the successor should:

Indicate the substantive reasons for the qualification in the predecessor auditor’s opinion.

Request the client to reissue the predecessor’s report on the prior year’s statements.

Issue an updated comparative audit report indicating the division of responsibility.

Express an opinion only on the current year’s statements and make no reference to the prior year’s statements.

ACCT444 Week 8 Final exam Latest 2017 August

Page 1

Question 1.1. (TCO 1) Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of (Points : 5)

objective judgment.

independent integrity.

professional skepticism.

impartial conservatism.

Question 2.2. (TCO 2) When an auditor submits a document containing audited financial statements to a client, and those financial statements include supplementary information required by GAAP, the auditor may choose any of the following options, except (Points : 5)

express an opinion on the information, if he or she has been engaged to examine such information.

express negative assurance on the information, if review procedures have been appropriately performed.

report on whether the information is fairly stated in relation to the financial statements taken as a whole, if appropriate procedures have been applied.

disclaim an opinion on the information.

Question 3.3. (TCO 2) In which of the following situations would an auditor ordinarily choose between expressing a qualified opinion or an adverse opinion? (Points : 5)

The auditor did not observe the entity’s physical inventory and is unable to become satisfied about its balance by other auditing procedures.

Conditions that cause the auditor to have substantial doubt about the entity’s ability to continue as a concern are inadequately disclosed.

There has been a change in accounting principles that has a material effect on the comparability of the entity’s financial statements.

The auditor is unable to apply necessary procedures concerning an investor’s share of an investee’s earnings recognized on the equity method.

Question 4.4. (TCO 3) The phrase U.S. generally accepted accounting principles is an accounting term that (Points : 5)

includes broad guidelines of general application but not detailed practices and procedures.

encompasses the conventions, rules, and procedures necessary to define U.S. accepted accounting practice at a particular time.

provides a measure of conventions, rules, and procedures governed by the AICPA.

is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS).

Question 5.5. (TCO 3) Under the ethical standards of the profession, which of the following situations involving nondependent members of an auditor’s family is most likely to impair the auditor’s independence? (Points : 5)

A parent’s immaterial investment in a client

A first cousin’s loan from a client

A spouse’s employment with a client

A sibling’s loan to a director of a client

Question 6.6. (TCO 2) Under U.S. GAAS, in which of the following situations would a group engagement partner least likely make reference to component auditor who audited a subsidiary of the entity? (Points : 5)

The component auditor was retained by the group engagement partner, and the work was performed under the group engagement partner’s guidance and control.

The group engagement partner finds it impractical to review the component auditor’s work or otherwise be satisfied as to the component auditor’s work.

The financial statements audited by the component auditor are material to the consolidated financial statements covered by the group engagement partner’s opinion.

The group engagement partner is unable to be satisfied as to the independence and professional reputation of the component auditor.

Question 7.7. (TCO 5) The use of prenumbered sales invoices is meant to prevent (Points : 5)

the failure to bill or record sales.

duplicate billings and recording of sales.

Both A and B

Neither A nor B

Question 8.8. (TCO 6) Auditors must make decisions regarding what evidence to gather and how much to accumulate. Which of the following is not a decision that must be made by auditors related to evidence? (Points : 5)

Audit procedure to use

Sample size

Timing of each audit procedure

Each of the above is a decision that must be made

Question 9.9. (TCO 7) A measure of the auditor’s assessment of the likelihood that there are material misstatements in an account, before considering the effectiveness of the client’s internal control, is the (Points : 5)

acceptable audit risk.

control risk.

inherent risk.

statistical risk.

Question 10.10. (TCO 8) Which of the following statements is correct concerning the concept of materiality? (Points : 5)

Materiality is determined by references to guidelines established by the AICPA.

Materiality depends only on the dollar amount of an item relative to other items in the financial statements.

Materiality depends on the nature of an item rather than the dollar amount.

Materiality is a matter of professional judgment.

Question 11.11. (TCO 9) Which of the following best illustrates the concept of sampling risk? (Points : 5)

The documents related to the chosen sample may not be available to the auditor for inspection.

An auditor may fail to recognize errors in the documents from the sample.

A randomly chosen sample may not be representative of the population as a whole for the characteristic of interest.

An auditor may select audit procedures that are not appropriate to achieve the specific objective.

Question 12.12. (TCO 10) The audit procedure that is least useful in gathering evidence on significant computer processes is (Points : 5)

documentation.

observation.

test decks.

generalized audit software.

Question 13.13. (TCO 11) Which of the following is not a condition for a contingent liability to exist? (Points : 5)

There is a potential future payment to an outside party that would result from a current condition.

There is uncertainty about the amount of the future payment.

The outcome of an uncertainty will be resolved by some future event.

The amount of the future payment is reasonably estimable.

Question 14.14. (TCO 5) A procedure that would most likely be used by an auditor in performing tests of control procedures, that involve segregation of functions and leave no transaction trail, is (Points : 5)

inspection.

observation.

reperformance.

reconciliation.

Question 15.15. (TCO 5) Which of the following audit tests would be regarded as a substantive test of transactions? (Points : 5)

Examine sales returns for approval by an authorized official.

Review the prelisting in the cash receipts book to determine whether cash is prelisted daily.

Reconcile the recorded cash receipts on the prelisting with the cash receipts journal and the bank statement for a one month period.

Account for a sequence of shipping documents, and examine each one to make sure that a duplicate sales invoice is attached.

Question 16.16. (TCO 6) If planned detection risk is reduced, the amount of evidence the auditor accumulates will (Points : 5)

increase.

decrease.

remain unchanged.

be indeterminate.

Question 17.17. (TCO 6) Which of the following statements is correct regarding the costs involved in obtaining evidence? (Points : 5)

Cost of obtaining evidence is a valid reason for excluding that evidence from the audit.

Physical examination is the most expensive type of audit evidence.

The least expensive type of evidence is analytical procedures.

Each of the above is correct

Question 18.18. (TCO 9) The tolerable exception rate (TER) has a significant effect on sample size. The relationship of TER to sample size is (Points : 5)

direct (larger TER = larger sample).

inverse (larger TER = smaller sample).

variable (sometimes larger, sometimes smaller).

not determinable.

Page 2

Question 1. 1. (TCO 2) An entity has changed its depreciation method for production equipment from a straight line method to units of production method based on hours of utilization. The entity’s auditor concurs with the change although it has a material effect on the comparability of the entity’s financial statements.

From the following opinion types, select and write the opinion type or types that can be used by the auditor. Up to two opinion types can be selected.

In addition, select and write the appropriate report modification options that are required to be made by the auditor. You can select as many options as apply. (Becker, Adopted)

Opinion Options

Unmodified

Except for qualified

Adverse

Disclaimer

Report Modification Options

Issue the independent auditor’s report without modification

Modify the introductory paragraph

Modify the auditor’s responsibility paragraph

Omit the auditor’s responsibility paragraph

Modify the opinion paragraph

Add an emphasis-of-matter paragraph preceding the opinion paragraph

Add an emphasis-of-matter paragraph following the opinion paragraph

(Points : 35)

Question 2. 2. (TCO 4) Distinguish between ordinary and gross negligence. (Points : 25)

Question 3. 3. (TCO 2) Discuss each of the three broad categories (types) of operational audits. (Points : 30)

Question 4. 4. (TCO 3) Fraud was extensively discussed in this class. There are three conditions that must be present for management fraud to exist. First, identify each of these three conditions. Then, for each condition, identify two risk factors related to the risk of fraudulent financial reporting.

(Points : 30)

Question 5. 5. (TCO 7) Discuss how each of the following influences the persuasiveness of evidence.

1. Relevance

Relevance keep the unnecessary things out of the evidence process. It saves time to go through the unrequired things. It is easier to make decisions using the relevant information.

2. Independence of provider

The provider of evidence is independent then it is more likely that the user of the evidence will need to check the factors which can threaten the reliability and objectivity of the evidence.

3. Effectiveness of client’s internal controls

Strong internal controls suggest that there will be less chances of errors and mistakes in the information provided for decision making purpose so the evidence collected is based on the accurate internal control systems and the audit opinion is correct.

4. Auditor’s direct knowledge

If auditor make enquiries direct from third parties or employees of the client then is more likely that evidence is objective, true and fair.

5. Degree of objectivity

If auditors perform audit procedures to collect evidence with objectivity and without under influence of a third part then it is perceived as the auditor has worked honestly and maintained professional standards.

(Points : 30)

Question 6. 6. (TCO 3) Melissa Barry, CPA, is the auditor of Audio Video, Inc. Audio Video has not paid Melissa’s audit fee for the past 2 years. Melissa is working on this year’s audit of Audio Video.

Determine whether Rule 101 of the AICPA’s Code of Professional Conduct, has been violated. Briefly explain why the situation violates or does not violate the code. (Points : 30)

Question 7. 7. (TCO 3) Assess the impact Enron has had on the auditing and accounting profession. Evaluate the industry’s response to date. Were the changes implemented enough to restore investor confidence and the public’s opinion of the auditing and accounting profession? (Points : 30)