Principles of Auditing & Other Assurance Services Chapter 7 Exam Bank Solution Manual Already Passed

Principles of Auditing & Other Assurance Services Chapter 7 Exam Bank Solution Manual Already Passed As of date - Answers A concept applied to internal control reporting by Sarbs and PCAOB Standard No . The internal control reports of both management and the auditors are as of the final day of the reporting period - the "as of date" Assessed level of control risk - Answers The level of control risk used by the auditors in determining acceptable detection risk for a financial statement assertion and, accordingly, in deciding on the nature, timing, and extent of substantive procedures Audit decision aid - Answers a standard checklist, form, or computer program that assists auditors in making audit decision by ensuring that they consider all relevant information or that aids them in weighting and combiining the information to make a decision Compensating control - Answers A control that reduces the risk that an existing or potential control weakness will result in a failure to meet a control objective (avoiding misstatements). Ordinarily controls performed to detect, rather than prevent, the original misstatement from occurring Complementary controls - Answers Controls that function together to achieve the same control objective Control Risk - Answers the possibility that a material misstatement due to error or fraud in a financial statement assertion will not be prevented or detected by the client's internal control Corrective control - Answers A control established to remedy control problems (eg misstatements) that are discovered thought detective controls Deficiency in internal control - Answers A situation in which the design or operation of a control does not allow management or employees, in the normal course of performing their functions, to prevent or detect misstatements on a timely basis. A deficiency in design exists when either a control necessary to meet a control objective is missing or the existing control is not designed to operate effectively. A deficiency in operation exists when a properly designed control does not operate as designed, or when the person performing the control does not possess the necessary authority or qualifications to perform the control effectively. Detective controls - Answers Designed to discover misstatements after they have occurred Fidelity bonds - Answers A form of insurance in which a bonding company agrees to reimburse an employer for losses attributable to theft or embezzlement by bonded employees Foreign corrupt practices act - Answers Federal legislation prohibiting payments to foreign officials for the purpose of securing business. The act also requires all companies under SEC jurisdiction to maintain a system of internal control providing reasonable assurance that transactions are executed only with the knowledge and authorization of management Further audit procedures - Answers Substantive procedures for all relevant assertions and tests of controls when the auditors' risk assessment includes an expectation that controls are operating effectively. The auditors perform risk assessment procedures to obtain an understanding of the client and its environment, including internal control. They then conduct a risk assessment and determine the appropriate further audit procedures Incompatible duties - Answers Assigned duties that place an individual in a position to both perpetrate and conceal errors or fraud in the normal course of job performance Inherent risk - Answers The risk of material misstatement of a financial statement assertion, assuming there are no related controls Integrated audit - Answers An audit where auditors, in addition to an opinion on the financial statements, express an opinion on the effectiveness of a company's internal control over financial reporting, in accordance with PCAOB auditing standard no. 5. Public companies with a market capitalization of $75,000,000 or more are required to undergo... Internal auditors - Answers Corporation employees who design and execute audit programs to test the effectiveness and efficiency of all aspects of internal control. the primary objective of internal auditors is to evaluate and improve the effectiveness and efficiency of the various operating units of an organization rather than to express an opinion as to the fairness of financial statements Internal control - Answers A process, effected by the entity's board of directors, management, and their personnel, designed to provide reasonable assurance regarding the achievement of objectives in the categories of (1) effectiveness and efficiency of operations, (2) reliability of financial reporting, and (3) compliance with applicable laws and regulations. Prior of 1996, The AICPA's professional standards referred to an entity's internal control as its Internal control questionnaire - Answers One of several methods of describing internal control in audit working papers. Questionnaires are usually designed so that "no" answers prominently identify weakness in internal control Management letter - Answers a report to management containing the auditors recommendations for correcting any deficiencies disclosed by the auditors consideration of internal control. May also help limit the auditors liability in the event a control weakness subsequently results in a loss by the client.