Question: Identify the four parts of the Uniform

> Identify two examples of acts or behavior by CPAs that would be considered acts discreditable to the profession.

> An audit client is creating a Web-based sales ordering system for customers to purchase products using personal credit cards for payment. Identify three risks related to an online sales system that management should consider. For each risk, identify an i

> Assume that Xinran Wang, CPA, is using 5 percent of net income before taxes, current assets, or current liabilities as her major guideline for evaluating materiality. What qualitative factors should she also consider in deciding whether misstatements may

> Compare the risks associated with network systems and database systems to those associated with centralized IT functions.

> Identify the traditionally segregated duties in IT systems.

> Describe which two factors of the audit risk model relate to the risk of material misstatement at the assertion level.

> Explain how control risk assessment differs for an integrated audit versus a financial statement-only audit.

> What do auditing standards require the auditor to consider when assessing the risk of material misstatements in revenue?

> What is the primary focus of the monitoring component of internal control?

> What three auditor actions are required to address the potential for management override of controls?

> Describe the types of overall responses by auditors to address fraud risk.

> What is meant by the term quality control as it relates to a CPA firm?

> In addition to inquiring of individuals among management who are involved in financial reporting positions, such as the CFO and controller, which additional individuals should you consider making inquiries of as part of your risk assessment procedures? B

> Assume that you are concerned that your client has recorded revenues that did not occur. What audit objective would you assess as having a high risk of material misstatement?

> Identify the management assertion and general balance-related audit objective for the specific balance-related audit objective: Read the fixed asset footnote disclosure to determine that the types of fixed assets, depreciation methods, and useful lives a

> Describe the types of information that should be included in the auditor’s working papers as evidence of the auditor’s fraud assessment procedures.

> The following is an example of a CPA firm’s quality control procedure requirement: “Any person being considered for employment by the firm must have completed a basic auditing course and have been interviewed and approved by an audit partner of the firm

> Explain why liquidity activity ratios ratios are useful to auditors.

> Describe examples of characteristics of transactions and balances that might cause an auditor to determine that a risk of material misstatement is a significant risk.

> Auditing standards require that the engagement team members engage in discussion about the susceptibility of the financial statements to the risk of fraud. How does this discussion relate to the required discussion about the risk of material misstatement

> Auditing standards require that the engagement team members engage in discussion about the risk of material misstatement. Describe the nature of this required discussion and who should be involved.

> Why is it important for the auditor to consider the risk of material misstatement at the overall financial statement level?

> This problem requires the use of ACL software, which can be accessed through the textbook website. Information about downloading and using ACL and the commands used in this problem can also be found on the textbook website. You should read all of the ref

> For how long does the Sarbanes–Oxley Act require auditors of public companies to retain audit documentation?

> What constitutes a significant risk?

> What types of inquiries should the auditor make when considering the risk of material misstatement due to fraud?

> How should the auditor consider risks related to revenue recognition when assessing the risk of material misstatement due to fraud?

> What are the five elements of an effective professional judgment process?

> What are the six elements of professional skepticism? Describe two of those six elements.

> What is the auditor’s responsibility when noncompliance with laws or regulations is identified or suspected?

> In recent years, globalization of business and factors such as technological disruption, tax reform, trade policies, and changing demographics in the workforce cause uncertainty and volatility in stock and bond markets. Why might it be important for you

> What four circumstances are required for a standard unmodified opinion audit report to be issued?

> Who is considered the client when auditing public companies?

> Describe some of the reasons why there have been calls for mandatory rotation of audit firms. How could an investor of a public company determine how long an audit firm has served as that company’s auditor?

> Describe what is meant by an audit procedure. Why is it important for audit procedures to be carefully worded?

> The Responsibilities principle requires that auditors be responsible for having appropriate competence and capabilities to perform the audit. What are the various ways in which auditors can fulfill this principle?

> Provide two examples of when an auditor might set a lower level of performance materiality for a particular class of transactions, account balance, or disclosure.

> List the four major evidence decisions that must be made on every audit.

> Describe how the use of audit data analytics might increase both the effectiveness and efficiency of the audit.

> Identify and explain factors that should keep the quality of audits high even though advertising and competitive bidding are allowed.

> Why is it important that an auditor develop an expectation of the account balance when performing substantive analytical procedures about the reasonableness of an account balance? What are the audit documentation requirements when performing a substantiv

> The client changed from FIFO to LIFO inventory valuation in the current year and reflected this change in their financial statements. How should this be reflected in the auditor’s report?

> What is the primary purpose of analytical procedures performed during the completion phase of the audit?

> Describe the information included in the opinion and basis for opinion sections in a separate audit report on the effectiveness of internal control over financial reporting. What is the nature of the additional paragraphs in the audit report?

> On February 17, 2019, a CPA completed all the evidence gathering procedures on the audit of the financial statements for the Buckheizer Technology Corporation for the year ended December 31, 2019. The audit is satisfactory in all respects except for the

> What are the purposes of the auditor’s responsibilities section in the auditor’s report? Identify the most important information included in the auditor’s responsibilities section.

> Distinguish among the following three factors impacting a loan interest rate: risk-free interest rate, business risk, and information risk. Which one or ones does the auditor reduce by performing an audit?

> Why might an organization seek the assurance of a CPA about information presented in the organization’s corporate sustainability report?

> Explain the auditor’s responsibility to consider compliance with laws and regulations. How does this responsibility differ for laws and regulations that have a direct effect on the financial statements compared to other laws and regulations that do not h

> How do the eight parts of a standard unmodified opinion audit report for nonpublic companies differ from those found in a qualified opinion report?

> Auditing standards have been criticized by different sources for failing to provide useful guidelines for conducting an audit. The critics believe the standards should be more specific to enable practitioners to improve the quality of their performance.

> Explain how audit risk and materiality are related and why they need to be considered together in planning an audit.

> Explain audit services, attestation services, and assurance services, and give examples of each.

> Assume materiality for the financial statements as a whole is $100,000 and performance materiality for accounts receivable is set at $40,000. If the auditor finds one receivable that is overstated by $55,000, what should the auditor do?

> Explain why there is an inverse relationship between planned detection risk and the amount of evidence an auditor collects for a specific audit objective.

> Assume a company with the following balance sheet accounts: You are concerned only about overstatements of owner’s equity. Set performance materiality for the three relevant accounts such that the preliminary judgment about materiality

> Diane Smith, CPA, performed tests of controls and substantive tests of transactions for sales for the month of March in an audit of the financial statements for the year ended December 31, 2019. Based on the excellent results of both the tests of control

> How might the performance of test of controls provide evidence related to the presentation transaction-related audit objective?

> Explain the relationship between the occurrence transaction-related audit objective and the existence and completeness balance-related audit objectives.

> What are the three categories of members under the AICPA Code of Professional Conduct?

> List the nine balance-related audit objectives in the verification of the ending balance in inventory and provide one useful audit procedure for each of the objectives.

> Identify risks for extensive IT-based accounting systems.

> Explain the relationship between the methodology for designing tests of controls and substantive tests of transactions in Figure 13-5 (p. 429) and the methodology for designing tests of details of balances in Figure 13-7 (p. 431). Figure 13-5: Figure

> Table 13-3 (p. 427) illustrates variations in the emphasis on different types of audit tests. What are the benefits to the auditor of identifying the best mix of tests? Table 13-3: TABLE 13-3 Variations in Evidence Mix Substantive Substantive Tests

> Assume that the client’s internal controls over the recording and classifying of fixed asset additions are considered deficient because the individual responsible for recording new acquisitions has inadequate technical training and limited experience in

> If the auditor assesses control risk as high for a transaction-related audit objective, what does that imply for detection risk and the level of substantive testing?

> How does the auditor use information obtained from the control risk assessment and testing of controls to plan audit procedures?

> Accounting standards require that companies provide footnote disclosures that enable a reader to understand the nature, timing, amount, and uncertainty surrounding revenue and cash flows arising from contracts with customers. Provide an example of an int

> Discuss the importance of the control environment, or “setting the tone at the top,” in establishing a culture of honesty and integrity in a company.

> The two components of professional skepticism are a questioning mind and a critical assessment of the audit evidence. How do these components help an auditor distinguish an unintentional misstatement from an intentional (fraudulent) misstatement?

> Explain the benefits of using audit engagement management software.

> What is meant by the control environment? What is the relationship between the control environment and the other four components of internal control?

> Describe the types of procedures auditors perform as part of their risk assessment procedures.

> What two aspects of internal control must the auditor assess when performing procedures to obtain an understanding of internal control?

> Provide two examples of factors that might increase the risk of material misstatement at the overall financial statement level.

> Define misappropriation of assets and give two examples of misappropriation of assets.

> Describe the following documents and records and explain their use in the sales and collection cycle: bill of lading, credit memo, remittance advice, and accounts receivable trial balance.

> In Part I of the case, you performed preliminary analytical procedures for Pinnacle (pp. 267–269). The purpose of Part II is to identify factors influencing risks and the relationship of risks to audit evidence. During the planning phase of the audit, yo

> In Parts I (pp. 267–269) and II (pp. 302–303) of this case, you performed preliminary analytical procedures and assessed acceptable audit risk and inherent risk for Pinnacle Manufacturing. The auditor also assesses fraud risk as part of risk assessment p

> Following are descriptions of 10 internal controls. 1. The company has an organizational chart that establishes the formal lines of reporting and authorization protocols. 2. Before a cash disbursement can be processed, all payee information must be verif

> During audit planning, an auditor obtained the following information: 1. Significant operations are located and conducted across international borders in jurisdictions where differing business environments and cultures exist. 2. There are recurring attem

> Define what is meant by a tick mark. What is its purpose?

> Newspaper headlines frequently highlight instances where business professionals, politicians, and others are accused of engaging in unethical behavior. In response, there have been numerous attempts to reduce their occurrence. For example, some have argu

> The list below indicates various audit, attestation, and other engagements involving auditors. 1. A report on the effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes–Oxley Act. 2. An examination report on

> Each year near the balance sheet date, when the president of Bargon Construction, Inc., takes a 3-week vacation to Hawaii, she signs several checks to pay major bills during the period she is absent. Jack Morgan, head bookkeeper for the company, uses thi

> The following audit procedures are included in the audit program of Holland Equipment, Inc. 1. Use audit software to examine journal entries in the sales, cash receipts, purchases, cash disbursements, payroll, and general journals for any amounts exceedi

> Appliances Repair and Service Company bills all customers rather than collecting in cash when services are provided. All mail is opened by Tom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is in the office daily. There

> The following misstatements are included in the accounting records of the Dillon Manufacturing Company: 1. Cash paid on accounts receivable was stolen by the mail clerk when the mail was opened. 2. A sales invoice was miscalculated by $1,000 as a result

> Public companies are required to file restated financial statements with the SEC when they discover after the audited financial statements have been issued that the financial statements are materially misstated. The misstatements may have been the result

> Each of the following situations involves possible violations of the AICPA Code of Professional Conduct. For each situation, state whether it is a violation of the Code. In those cases in which it is a violation, explain the nature of the violation and t

> Each of the following situations involves a possible violation of the AICPA Code of Professional Conduct. For each situation, state the applicable rule of conduct and whether it is a violation. a. Stefan, CPA, provides tax services, management advisory s

> Following are six situations that involve the audit risk model as it is used for planning audit evidence requirements in the audit of inventory. Required: a. Explain what low, medium, and high mean for each of the four risks and planned evidence. b. Fi

> What are the purposes of the AICPA Statements on Standards for Attestation Engagements?

> Target and Kohl’s are chains of stores that cater to customers who desire name-brand goods at lower prices. The Securities and Exchange Commission (SEC) Form 10-K filing rules require management of U.S. public companies to include background information

> Listed below are various risks identified during audit planning that you have been asked to evaluate to assess whether they are significant risks. 1. Fernandez Wholesalers sells energy drinks to various distributors. As they have expanded sales to additi

> Moranda and Sills, LLP, has served for over 10 years as the auditor of the financial statements of Highland Bank and Trust. The firm is conducting its audit planning for the current fiscal year and is in the process of performing risk assessment procedur

> This problem requires you to access PCAOB Auditing Standard AS 2110, Identifying and Assessing Risks of Material Misstatements (pcaobus.org). Use this standard to answer each of the questions below. For each answer, document the paragraph(s) in AS 2110 s

> The following are concepts discussed in Chapter 8 and this chapter: 1. Preliminary judgment about materiality 7. Estimated total misstatement in a segment 2. Control risk 8. Planned detection risk 3. Risk of fraud 9. Estimate of the combined misstatement

> The following are various activities an auditor does during audit planning. 1. Review accounting principles unique to the client’s industry 2. Determine the likely users of the financial statements 3. Evaluate the appropriate financial statement measures

> Gordon & Groton, CPAs, were the auditors of Bank & Company, a brokerage firm and member of a national stock exchange. Gordon & Groton audited and reported on the financial statements of Bank, which were filed with the Securities and Exchange Commission.