![MCQ 02-03 [LO4)] After the auditors learned of Auditee Companys failure to record an expense for obsolete inventory, they agreed to a small adjustment to the financial statements because the Auditee president told them the company would violate its debt agreements if the full amount were recorded. This is an example of a lack of O auditors training and proficiency O planning and supervision. O audit investigative independence O audit reporting independence.](http://img.homeworklib.com/questions/e8c9c790-472d-11ea-8380-1dc282988bc7.png?x-oss-process=image/resize,w_560)
Homework Answers
Answer to 1st Multiple choice:
The correct option is the 1st option - A potential conflict of interest always exists between the auditor and the management of the enterprise under audit.
Explanation for the choice chosen:
It is assumed by the auditor that the management is neither honest or dishonest regardless of any good past experience with the management.
The audit that is conducted by the auditor, recognizes that there could be a potential of material misstatement due to fraud or error, which does not take into account of any past experience with the entity and the auditors belief about management integrity and honesty.
Answer to 2nd Multiple Choice:
The correct answer is the second option which is Investigative Independence.
Explanation for the choice chosen:
Auditor independence refers to the independence of the internal auditor or of the external auditor from entities that may have a financial interest in the entity being audited. Independence requires integrity and independence should be both, in mind and in appearance.
The protection of auditors ability to execute and implement procedures and strategies in the manner they consider appropriate is known as Investigative independence. Auditors should not be restricted in any way by the auditee company, as well as all their doubts, questions and queries should be answered by the entity along with unlimited access to all the entity information.
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It is always a good idea for auditors to begin an audit with a professional skepticism...
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk...
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk. The auditor may make separate or combined assessments of inherent risk and control risk. Detection risk cannot be changed at the auditor's discretion The greater the inherent and control risks the auditor believes exist, the less detection risk that can be accepted. (d) 7. Inherent risk and control risk...
Due professional care requires auditors to: A) obtain independent, third party (non-auditee) documentation as evidence for...
Due professional care requires auditors to: A) obtain independent, third party (non-auditee) documentation as evidence for all information presented in the financial statements. B) exercise professional skepticism during the audit. C) disregard any evidence generated by the auditee during the audit. D) find every error contained in the financial statements prepared by management. What is the correct answer? Why is it the correct answer? Why are the other choices incorrect?
1. Auditors communicate the results of an audit in an audit report. Of the four categories...
1. Auditors communicate the results of an audit in an audit report. Of the four categories of audit reports, which one indicates that while the auditor believes the financial statements are fairly presented, very material departures from GAAP, and the scope of the audit may have been substantially restricted? a)Adverse or disclaimer b)Qualified c)Standard unqualified d)Unqualified with explanatory paragraph 2. When communicating the purpose of internal controls, it is important to note that internal controls a)can be one hundred percent...
Can you answer these questions? Thank you 7. An audit of historical financial statements most commonly...
Can you answer these questions? Thank you
7. An audit of historical financial statements most commonly includes the: a. balance sheet, the income statement, and the statement of cash flows. b. income statement, the statement of cash flows, and the statement of net working capital. c. statement of cash flows, the balance sheet, and the retained earnings statement. all of the above The generally accepted auditing standard that requires “Adequate technical training and proficiency” is normally interpreted as requiring the...
The Audit Committee consists of… Question 11 options: 1) executives of the company. 2) a subcommittee...
The Audit Committee consists of… Question 11 options: 1) executives of the company. 2) a subcommittee of the AICPA who establish the SAS. 3) members of the Board of Directors. 4) members appointed by the PCAOB. Question 12 (3 points) What organization is responsible for setting auditing standards for audits of publicly-traded companies in the U.S.? Question 12 options: 1) AICPA 2) FASB 3) GASB 4) PCAOB Question 13 (3 points) The auditor must be independent of the auditee unless…...
What consulting or nondash audit services are prohibited for auditors of public companies? Explain why it...
What consulting or nondash audit services are prohibited for auditors of public companies? Explain why it is generally agreed that prohibitions on consulting and non-audit services will improve auditors' professional judgment and professional skepticism. What consulting or nondash audit services are prohibited for auditors of public companies? (Select all that apply.) 1. Tax services to audit clients 2. Legal and expert services unrelated to the audit 3. Security of electronic information 4. Test the effectiveness of internal control over financial...
e. An audit of a U.S. not-for-profit organization. f. An audit of a U.S. private company...
e. An audit of a U.S. not-for-profit organization. f. An audit of a U.S. private company to be used for a loan from a publicly traded bank. g. An audit of a U.S. public company. h. An audit of a U.S. public company that is a subsidiary of a Japanese company that will be used for reporting by the parent company in Japan. 2-20 (OBJECTIVE 2-7) Ray, the owner of a small company, asked Holmes, a CPA, to conduct an...
Discussion Topic: When performing an audit, auditors are especially concerned about engagement risk. For this reason,...
Discussion Topic: When performing an audit, auditors are especially concerned about engagement risk. For this reason, they perform main activities to reduce engagement risks. Further, the auditing standards require auditors to understand the client's business, and its environments, and its internal controls when planning the audit so that they could better plan the nature, timing, and extent of the audit. Required: 1. Discuss why the auditor would be concerned about engagement risk and identify two or more activities the auditors...
These are more choices to choose from. John Josephs, an audit manager for Tip, Acanoe &...
These are more choices to
choose from.
John Josephs, an audit manager for Tip, Acanoe & Tylerto, was asked to speak at a dinner meeting of the local Small Business Administration Association. The president of the association has suggested that he talk about the various phases of the audit process to help small business owners better understand what auditors do. John has asked you, his trusted assistant, to prepare an outline for his speech. He suggests that you answer the...
What is the meaning of independence from the perspective of the government auditor and why is...
What is the meaning of independence from the perspective of the
government auditor and why is independence so important? See the
article below to answer the question.
Independence The standard of independence covers both independence of mind and independence in appearance. Independence of mind concerns the state of mind that permits the auditor to audit without being affected by influences that may compromise professional judgment, thereby allowing the auditor to act with integrity, objectivity and professional skepticism. Independence in appearance...
6. Which of the following statements is not correct? If (a) (b) (c) individual audit risk remains the same, detection risk has an inverse relationship to inherent risk and control risk. The auditor may make separate or combined assessments of inherent risk and control risk. Detection risk cannot be changed at the auditor's discretion The greater the inherent and control risks the auditor believes exist, the less detection risk that can be accepted. (d) 7. Inherent risk and control risk...
Due professional care requires auditors to: A) obtain independent, third party (non-auditee) documentation as evidence for all information presented in the financial statements. B) exercise professional skepticism during the audit. C) disregard any evidence generated by the auditee during the audit. D) find every error contained in the financial statements prepared by management. What is the correct answer? Why is it the correct answer? Why are the other choices incorrect?
Can you answer these questions? Thank you
7. An audit of historical financial statements most commonly includes the: a. balance sheet, the income statement, and the statement of cash flows. b. income statement, the statement of cash flows, and the statement of net working capital. c. statement of cash flows, the balance sheet, and the retained earnings statement. all of the above The generally accepted auditing standard that requires “Adequate technical training and proficiency” is normally interpreted as requiring the...
e. An audit of a U.S. not-for-profit organization. f. An audit of a U.S. private company to be used for a loan from a publicly traded bank. g. An audit of a U.S. public company. h. An audit of a U.S. public company that is a subsidiary of a Japanese company that will be used for reporting by the parent company in Japan. 2-20 (OBJECTIVE 2-7) Ray, the owner of a small company, asked Holmes, a CPA, to conduct an...
These are more choices to
choose from.
John Josephs, an audit manager for Tip, Acanoe & Tylerto, was asked to speak at a dinner meeting of the local Small Business Administration Association. The president of the association has suggested that he talk about the various phases of the audit process to help small business owners better understand what auditors do. John has asked you, his trusted assistant, to prepare an outline for his speech. He suggests that you answer the...
What is the meaning of independence from the perspective of the
government auditor and why is independence so important? See the
article below to answer the question.
Independence The standard of independence covers both independence of mind and independence in appearance. Independence of mind concerns the state of mind that permits the auditor to audit without being affected by influences that may compromise professional judgment, thereby allowing the auditor to act with integrity, objectivity and professional skepticism. Independence in appearance...
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