Exam 5: Audit Responsibilities and Objectives

The reason auditors accumulate evidence is to

For the most part, auditors treat each transaction cycle

Formamould Inc. sells plastic moulds to a variety of companies. Some moulds are custom made and cost thousands of dollars. To help customers finance these purchases, Formamould uses a variety of methods, such as payment terms stretched over three years, delayed payment, and pay-as-you-produce models tailored to individual customer needs. The outstanding balance is included in current accounts receivable. The general balance-related audit objective affected by this activity is

The factor that distinguishes an error from fraud or other irregularities is

Gabori Company would like to pay less income tax this year. It decided that it could do this by understating its inventory values, increasing costs of goods sold. This was done by deliberately pricing the inventory at incorrect amounts, so that it would be shown at a lower value than it was really worth (for example, items worth five dollars each were shown at fifty cents each). Which management assertion has been violated?

What is the auditor's role in the detection of computer fraud?

The sole shareholder of Jade Company had a contractor pave the parking lot at the company building as well as the driveway of his home. Both paving jobs were billed to the company on a single invoice. The general balance-related audit objective affected by this activity is

The controller who had been with Bianca Limited for six years was fired last month, allegedly for pocketing cash. Unfortunately, there was a fire in the accounting department the week before he was fired, which destroyed the accounting records, including the computer equipment and current backup disks. The only records available for the current year is a copy of the computer system that is a month old. There are also disks for the year-ends going back three years. These were at the president's home, the place where the company kept archival records. Required: Explain how this situation might affect the audit process.

The decision to continue doing the audit of an existing client is

The responsibility for adopting a sound and appropriate financial reporting framework and corresponding accounting policies, maintaining adequate internal controls, and making fair representations in the financial statements rests

Camilla is preparing the audit program for the inventory of Summers, a large department store. Camilla listed "select a sample of invoices from suppliers to verify that the risks and rewards of the inventory were transferred to Summers." Camilla is concerned that some of the inventory in the store might be on consignment. The account-balance-related objective that Camilla is concerned about is

The responsibility for the preparation of the financial statements and the accompanying footnotes belongs to

To help improve the cash balance on the financial statements, the controller recorded several deposits from early January in the month of December. The general balance-related audit objective affected by this activity is

Pet Shop Ltd. is a large retail outlet with ten full-time employees in addition to the owner. You dropped by on your way home one day to organize the audit planning process for the coming year and noticed brand new terminals at the cashier's desk. One of the employees was having fun zapping inventory items. The owner teased him about the new laser scanning devices and told him to get to work to see which items needed to be ordered. It turns out that Pet Shop Ltd. has implemented a new point-of-sale computer system that is integrated with inventory. The last time you were there to buy dog food (about three months ago), the store had old computer terminals that were no longer functional and staff were recording sales transactions manually in the sales journal. Required: List the three sections of the audit. For each section, explain how these new computer systems might affect the audit process.

Your PA firm audits the Barney Bloke Parts company, which manufactures plastic bumpers and other automobile parts in eight factories scattered across southern Ontario. The company has a December year end. It is now November 15. The planning file indicates that internal controls in the accounts receivable area are poor, as there has been significant employee turnover. A review of the prior year's working paper file indicates that there was a poor response to the accounts receivable and accounts payable confirmation requests. There were several errors in inventory pricing and problems with obsolescence. Required: List the financial statement cycles that need to be tested. For each cycle, identify at least one transaction that needs to be examined. For that transaction, identify a management assertion that may have a high risk of error associated with it and explain why you believe the risk of error is high.

Your PA firm has just obtained a new client and you have been assigned the task of preparing the knowledge of business section of the file. Which of the following best describes the process of gathering the knowledge of business for a client?

The objective of the audit of financial statements by the auditor is the expression of an opinion on

CAS 200 explains that the purpose of the financial statement audit is to express an opinion on the financial statements. This opinion is an assessment of whether the financial statements are presented fairly using

Marianne is currently performing tests of controls on the presence of an employee code of conduct, the presence of a whistle blower line, and on how management responded to complaints and implemented systematic penalties for instances where violations of the code of conduct existed. Marianne is currently evaluating the

Which of the following statements is true regarding a difference between general audit objectives and specific audit objectives for an account balance?