🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeTextbook Notes300,000US110,000

ACG 5637 Chapter Notes - Chapter 14: Analytical Review, Balanced Scorecard, Audit Evidence

20 views3 pages
School
University of Florida
Department
Accounting
Course
ACG 5637
Professor
Blake Bowler

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

An overview of final evidence aggregation and finalization of the financial statements. The purpose is to assess whether the auditor"s individual conclusions are supported by the evidence and are consistent across classes of transactions and accounts. It is important to test the grouping of individual accounts into line items to be reported in the fs. The process of testing management"s compilation of fs is straightforward but a necessary step of the audit. Group audits or audits of consolidated financial statements. Part of an audit performed by a different auditor: the responsibility to manage the overall audit process for the components of a group audit is explicitly assigned to the group auditor. Once the fs are compiled, auditors are required to perform a final analytical review. This review may reveal results that are still unexplained or inconsistent with the auditor"s understanding of the firm"s economic reality and should be subject to further review and inquiry by the auditor.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ACG 5637 Chapter Notes - Chapter 11: Subledger, Transaction Processing, General Ledger
chocolateleopard236
ACG 5637 Chapter Notes - Chapter 4: Special Circumstances, Internal Audit, Market Saturation
chocolateleopard236
ACG 5637 Chapter Notes - Chapter 3: Financial Audit, Financial Statement, Internal Control
chocolateleopard236

Related Questions

14. What is the purpose of using analytical reviews during the planning stage of an audit?

MULTIPLE CHOICE

a. To test controls

b. to insure duties are segregated.

c. to identify unusual items for further investigation.

d. to insure the audit evidence supports the auditor’s conclusions regarding the financial statements.

33. Which of the following is not considered a limitation of internal control?

MULTIPLE CHOICE

a. Misunderstanding instructions.

b. Not having an internal audit function.

c. Mistakes of judgment.

d. Carelessness, distraction and/or fatigue.

35. Which of the following is correct concerning evidence provided by specialists on audits?

MULTIPLE CHOICE

a. The use of a specialist is most likely to be appropriate when the auditor's independence is questioned.

b. The auditor must obtain an understanding of the methods used by the specialist to determine whether the findings are suitable to serve as corroborating evidence.

c. The specialist must be independent in fact and appearance.

d. A specialist should not be used to determine the market valuation of inventory.

51. Auditors are primarily concerned with internal controls that relate to:

MULTIPLE CHOICE

a. Financial statement assertions made by management.

b. Compliance with laws and regulations.

c. Generally accepted auditing standards.

d. Balance sheet accounts.

Which of the following statements is most correct regarding the independent auditor's reliance on the tests of controls performed by the internal auditors to reduce their substantive testing?

1-The independent auditor must obtain assurance of the independence of the internal auditors but need not test their work.
2-It is not acceptable for the independent auditor to rely upon the work of the internal auditors.
3-There are no restrictions in relying upon the work of internal auditors.
4-The independent auditor must evaluate the competency and objectivity of the internal auditors and must test a sample of the work of the internal auditors in order to rely upon their work.

The term "materiality" as used in auditing is best described as the

1-substance of the auditing procedures.
2-amount of misstatement on the financial statements that would influence a decision maker.
3-underlying evidence upon which the audit opinion is based.
4-amount of material the auditor gathers as evidence to support the audit opinion.

Prior to accepting an audit client an auditor has a professional obligation to

1-contact the predecessor auditor.
2-perform preliminary analytical review procedures.
3-do all of the listed actions.
4-obtain approval for the audit engagement from the SEC.

Which of the following best represents financial statement fraud?

1-The transfer agent issues 40,000 shares of the company's stock to a friend without authorization by the board of directors.
2-The controller of the company decreases a contingent liability by $3 million so the company will meet analysts' expectations this quarter.
3-The in-house attorney receives payments from the French government for negotiating the development of a new plant in Paris.
4-The accounts receivable clerk covers up the theft of cash receipts by writing off older receivables without authorization.

Sampling risk is the risk that

1-errors are inherent and may be present in the population without regard to the internal controls.
2-the population will not contain characteristics representative of the sample such that inferences made about that sample will be incorrect.
3-internal controls are not adequate to prevent or detect material errors.
4-the sample will not contain characteristics representative of the population such that inferences made about that population will be incorrect.

Control risk that is assessed excessively high (i.e. the auditor believes control risk is high when in reality it is moderate or low) leads to:

1-audit inefficiency.
2-a less expensive audit.
3-reduced substantive testing.
4-errors that are more likely to occur than anticipated.

The purchasing process consists of each of the following phases except

1-receipts of goods and services.
2-approval of items for payment.
3-authorized request for goods and services.
4-cash receipts.

14. (1) In violation of company policy, Lowell Company erroneouslycapitalized the cost of painting its warehouse. The auditorsexamining Lowell's financial statements would most likely detectthis when:

A) Discussing capitalization policies with Lowell'scontroller.

B) Examining maintenance expense accounts.

C) Observing, during the physical inventory observation, that thewarehouse had been painted.

D) Examining the construction work orders supporting itemscapitalized during the year.


15. Which of the following is not one of the auditors' objectivesin auditing depreciation?


A) Establishing the reasonableness of the client's replacementpolicy.

B) Establishing that the methods used are appropriate.

C) Establishing that the methods are consistently applied.

D) Establishing the reasonableness of depreciationcomputations.

16. The scope of an internal audit is initially defined bythe:

A) Audit objectives.

B) Scheduling and time estimates.

C) Preliminary survey.

D) Audit program.

17. For audit purposes, a corporation's articles of incorporationare normally:

A) Copied and placed on the owners' equity lead schedule.

B) Copied and placed in the permanent file.

C) Confirmed with the transfer agent.

D) Ignored since they are not normally considered to be related tothe internal control structure.

18. Arel, CPA, was engaged by a group of royalty recipients toapply agreed-upon procedures to financial data supplied by ModitCo. regarding Modit's written assertion about its compliance withcontractual requirements to pay royalties. Arel's report on theseagreed-upon procedures should contain a(n):

A) Disclaimer of opinion about the fair presentation of Modit'sfinancial statements.

B) List of the procedures performed (or reference thereto) andArel's findings.

C) Opinion about the effectiveness of Modit's internal controlactivities concerning royalty payments.

D) Acknowledgment that the sufficiency of the procedures is solelyArel's responsibility

19. The auditor's primary means of obtaining corroboration ofmanagement's information concerning litigation is a:

A) Letter of audit inquiry to the client's lawyer.

B) Letter of corroboration from the auditor's lawyer upon review ofthe legal documentation.

C) Confirmation of claims and assessments from the other parties tothe litigation.

D) Confirmation of claims and assessments from an officer of thecourt presiding over the litigation.

20. An auditor identified a material weakness in internal controlin August. The client was informed and the client corrected thematerial weakness prior to year-end (December 31); the auditoragrees that the correction eliminates the material weakness priorto year-end. The appropriate audit report on internal control underPCAOB standards on reporting on internal control is:

A) Adverse.

B) Unqualified.

C) Disclaimer.

D) Qualified.

21. Which of the following auditing procedures is ordinarilyperformed last?

A) Reading of the minutes of the directors' meetings.

B) Confirming accounts payable.

C) Obtaining a management representation letter.

D) Testing of the purchasing function

22. When an auditor has concluded there is substantial doubt aboutan entity's ability to continue as a going concern for a reasonableperiod of time beyond the current financial statement date(9/30/X1), the auditor's responsibility includes:

A) Preparing prospective financial information to verify whethermanagement's plans can be effectively implemented.

B) Projecting conditions and events from one year prior to thisyear's date (9/30/X0) to 9/30/X1.

C) Issuing an adverse or negative assurance opinion, depending uponmateriality, due to the possible effects on the financialstatements.

D) Considering the adequacy of disclosure about the entity'spossible inability to continue as a going concern.

23. Which of the following manipulations would understate accountspayable on the financial statements?


A) Overstatement of purchases.

B) Closing the cash disbursements journal prior to year-end.

C) Leaving the cash receipts journal open after year-end.

D) Overstating purchase returns

24. An example of an internal control weakness is to assign thepayroll department the responsibility for:


A) Preparing the payroll expense distribution.

B) Preparing the payroll checks.

C) Authorizing increases in pay.

D) Preparing journal entries for payroll expense

25. In governmental accounting, emphasis is placed on:


A) Total assets owned by the governmental entity.

B) Generating income form funds employed.

C) Expenditures of funds.

D) The flow of funds through the income statement.

26. In auditing long-term debt, an auditor would be most likelyto:


A) Perform analytical procedures on the bond prenumbered discountaccounts.

B) Examine documentation of assets purchased with bond proceeds forliens.

C) Compare interest expense with the long-term debt amount forreasonableness.

D) Confirm the existence of individual long-term debt holders atyear-end.

27. Which of the following tests of controls most likely would helpassure an auditor that goods shipped are properly billed?


A) Scan the sales journal for sequential and unusual entries.

B) Examine shipping documents for matching sales invoices.

C) Compare the accounts receivable ledger to daily salessummaries.

D) Inspect unused sales invoices for consecutivepre-numbering.

28. Which of the following audit procedures is best for identifyingunrecorded trade accounts payable?


A) Reviewing cash disbursements recorded subsequent to the balancesheet date to determine whether the related payable applies to theprior period.

B) Investigating payables recorded just prior to and justsubsequent to the balance sheet date to determine whether they aresupported by receiving reports.

C) Examining unusual relationships between monthly accounts payablebalances and recorded cash payments.

D) Reconciling vendors' statements to the file of receiving reportsto identify items received just prior to the balance sheetdate.

29. Which of the following is true about the auditors' observationof the client's physical inventory?


A) The count must be made at year-end.

B) The auditors should supervise the client's personnel.

C) The auditors' observation addresses the existenceassertion.

D) The auditors should justify any omission of the observation inthe audit report.

30. Which of the following is not a reason for the specialsignificance attached by the auditors to the verification ofinventories?


A) The determination of inventory valuation directly affects netincome.

B) The existence of inventories is inherently difficult tosubstantiate.

C) Special valuation problems often exist for inventories.

D) Inventories are often the largest current asset of anenterprise.

31. (1) When the auditors obtain an understanding of internalcontrol for the financing cycle documentation will frequentlyinclude a written description as well as a(n):


A) List of audit objectives.

B) Decision table.

C) Summary of tests of controls.

D) Internal control questionnaire.