Chapter 10 Assessing Control Risk / Tests of Controls |Learning Check | 10-1. a. Assessing control risk is the process of evaluating the effectiveness of an entity’s internal controls in preventing or detecting material misstatements in the financial statements. b. Control risk should be assessed in terms of individual financial statement assertions. 10-2. In assessing control risk for an assertion‚ the auditor should perform the following five steps:
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changes in circumstances that occur during the audit. Here‚ the risk can be evaluated by picking up an underlying comprehension of how Smackey Dog Foods works together and the business they are in. Keller CPA’s should take a look at the how the internal controls‚ procedures and frameworks are planned and are being actualized with the goal that the transcations-related audit objective of occurence‚ accuracy‚ completeness‚ order‚ timing‚ and posting can be evaluated. 2. Substantive tests: Substantive
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Disclosure Rules. 11 2.3.5 – 500s Conflicts of Analyst Interest. 12 2.3.6 – 600s Funding; 800‚ 900‚ 1100s Disciplining Transgressors. 13 2.4 SOX Section 404. 13 2.4.1 Overview of Section 404. 13 2.4.2 Internal Auditor Role in Section 404. 14 2.4.3 Definition of deficiencies in internal control system. 15 2.5 Market reactions after SOX. 16 3. IMPLEMENTATION OF THE RESEARCH 18 3.1 Selection of the study sample. 18 3.2 Research methodology. 21 3.2.1 Average variation analysis. 21 3.2.2 Gaussian
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CHAPTER ONE: Accounting Information Systems and the Accountant DISCUSSION QUESTIONS: 3. Advances in IT are likely to have a continuing impact on financial accounting. What are some changes you think will occur in the way financial information is gathered‚ processed‚ and communicated as a result of increasingly sophisticated IT? Advances in IT that allow transactions to be captured immediately‚ accountants and even the AIS itself can produce financial statements almost in real-time. Interactive data
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As a new auditor for the CPA firm of Croix‚ Marais‚ and Kale‚ you have been assigned to review the internal controls over mail cash receipts of Manhattan Company. Your review reviews the following: checks are promptly endorsed “For Deposits Only”‚ but no list of the checks is prepared by the person opening the mail. The mail is opened either by the cashier or by the employee who maintains the accounts receivable records. Mail receipts are deposited in the bank weekly by the cashier. Instructions:
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Case 5.2: Easy Clean Co. Internal Control Over Financial Reporting Component Evaluation- Control Environment Demonstrates Commitment to Integrity and Ethical Values Rating: 3 Present: Yes Functioning: No Internal control deficiency description: No written code of conduct or formal ethical standards No processes in place to evaluate employees ethical standards Tone at the top is minimal‚ with Doug and Phil appearing to have integrity‚ they work hard and stay late and the business is growing
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the revenue on the books. 3. PCAOB reads‚ “If one or more material weaknesses exist‚ the company’s internal control over financial reporting cannot be considered effective.” It is apparent that Sunbeam did not have effective internal controls over its financial reporting related to revenue recorded in its financial statements. Sunbeam should have measured or implemented internal controls over the newly devised “distributor program‚” back in 1997 when all the changes started taking place.
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inventory. The use of ratios by the auditors is an important but it requires skills and experience in order to get the correct analytical results. Other financial information required during the audit The auditors should have done more testing in the controls of the
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standards. Under Sabrnes-Oxley Act‚ executives must certify the internal control of their organization. Internal Control is an inherent part of this act as it requires strict guidelines of standards to be met (The
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provides a conceptual framework for the risk assessment standards. In recent years‚ auditors have tried to apply the model to audits of internal control‚ usually performed as parts of integrated audits. An integrated audit is an engagement where the auditor provides an opinion on the financial statements and an opinion on the effectiveness of internal control. It is integrated in the sense that the auditor tries to use some of the same procedures to meet both objectives. AUDIT RISK Basically
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