Exam 6: Audit Responsibilities and Objectives

The auditor's first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities,including but not limited to,law enforcement and the Securities and Exchange Commission.

In comparing management fraud with employee fraud,the auditor's risk of failing to discover the fraud is

If there is collusion among management,the chance a normal audit would uncover such acts is

An auditor has a duty to

When developing the audit objectives,the first step is to divide the financial statements into cycles.

Audits are expected to provide a higher degree of assurance for the detection of material frauds than is provided for an equally material error.

Below are five audit procedures,all of which are tests of transactions associated with the audit of the sales and collection cycle.Also below are the six general transaction-related audit objectives and the five management assertions.For each audit procedure,indicate (1)its audit objective,and (2)the management assertion being tested. 1.Vouch recorded sales from the sales journal to the file of bills of lading. (1)________ (2)________ 2.Compare dates on the bill of lading,sales invoices,and sales journal to test for delays in recording sales transactions. (1)________ (2)________ 3.Account for the sequence of prenumbered bills of lading and sales invoices. (1)________ (2)________ 4.Trace from a sample of prelistings of cash receipts to the cash receipts journal,testing for names,amounts,and dates. (1)________ (2)________ 5.Examine customer order forms for credit approval by the credit manager. (1)________ (2)________

An auditor should recognize that the application of auditing procedures may produce evidence indicating the possibility of errors of fraud and therefore should

Two overriding considerations affect the many ways an auditor can accumulate evidence: 1. Sufficient appropriate evidence must be accumulated to meet the auditor's professional responsibility. 2) Cost of accumulating evidence should be minimized. In evaluating these considerations

If a client has violated federal tax laws,

Which of the following statements best describes the auditor's responsibility regarding the detection of fraud?

The auditors determine which disclosures must be presented in the financial statements.

Listed below are several accounts listed from a company's trial balance.Next to each account put the letter corresponding to the transaction cycle used to audit the account. S = Sales and collection cycle I = Inventory and warehousing cycle A = Acquisition and payment cycle C = Capital acquisition and repayment cycle P = Payroll and personnel cycle 1.________ Sales returns and allowances 5.________ Salaries and commissions 2.________ Capital stock 6.________ Cost of goods sold 3.________ Buildings 7.________ Trade accounts receivable 4.________ Notes payable 8.________ Rent

The auditor is determining that the correct selling price was used for billing and that the quantity of goods shipped was the same as the quantity billed.She is gathering evidence about which transaction-related audit objective?

Briefly explain each management assertion related to account balances at period end.

When an auditor knows that an illegal act has occurred,she must

When reporting identified or suspected noncompliance,

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

The cycle approach to auditing

One of the characteristics of professional skepticism is_______,which is a desire to investigate beyond the obvious.