Exam 4: Audit Responsibilities and Objectives

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

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?

In May 2017,the firm of Chang and Crown (C&C)became the auditors of Laua Limited (LL)for the fiscal year ended December 31,2016.LL's shareholders and Board approved the change from its previous audit firm on the recommendation of LL's senior management.One of the new board members is a bit confused about management's role with respect to the financial statements and thought that Chang and Crown would be preparing the financial statements.He was also glad that the auditors would be able to help prevent illegal acts and fraud. Required: A)Distinguish between management's responsibility and the auditor's responsibility for the financial statements under audit. B)Explain to the board member why the auditor does not help prevent illegal acts and fraud.What is the role of the auditor with respect to illegal acts and fraud?

A financial statement audit typically consists of four sections that relate to risk.Identify the four sections and discuss the major activities performed by the auditor in each section.

If the purchase of a long-term note receivable is included as cost of goods sold,there is a violation of the

When comparing the auditor's responsibility for detecting employee fraud and for detecting errors,the profession has placed the responsibility

Auditing standards regarding the detection of illegal acts clearly state that the auditor provides

Which of the following is an example of a direct effect illegal act that could be performed by a client? Violation of

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

During the audit process steps,when will the auditor conduct tests of controls?

Flagpole Company Limited recently upgraded its accounting software due to changes in the payroll income tax rates.Unfortunately,there was an error in the software,and income tax was calculated incorrectly.The general transaction-related audit objective affected by this error is

Balance-related audit objectives are applied to which types of general ledger accounts?

When applying professional judgment,auditors are required to justify their decision based on seven criteria.List the criteria within the auditor's professional judgment framework.

The Big Insurance Company implemented a new computer system to track and record insurance premiums receivable.The program automatically prints invoices and sends them to customers when premiums are due.Due to a program error,a whole series of invoices were included in sales but not in accounts receivable.The general balance-related audit objective affected by this activity is

Sean Clem has done a review engagement and prepared the tax return for your web design business for the last five years.The books and records have always been well organized,although year-end adjusting entries have been required.You do some of the accounting yourself and the rest of the accounting records are handled by your spouse,who is also an employee of the business. This year,you would like to expand your business to provide ISP (internet service provider)services to your clients.This would entail you purchasing additional computer equipment and software.You are also considering hiring an additional employee (you currently have three),and you are looking at obtaining a loan for $100 000 from the bank.The bank says that you should have your records audited,but you are not sure what this will mean. Required: Identify the issues that Sean needs to consider during the planning of the audit.

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

Substantive tests of details of balances are specific procedures intended to

You have been assigned as the in-charge auditor for a new client,Beltair House.Beltair House is a non-profit charitable organization that operates a women's shelter.In the past,the organization had been almost fully funded by the provincial government.However,due to recent government budget cuts,Beltair now has to raise operating funds from public donations. Because of financial constraints,there is now only one full-time manager,Joan Ng.Joan has the help of several volunteers.The shelter residents also help out with the chores and with maintenance and cleaning.Ng has been able to arrange for a local food bank to provide a large portion of the food required for meals.Door-to-door canvassers have been able to raise money to keep the House going,but Ng is concerned that this will change. Required: Identify issues that affect the risk of this audit engagement that you will need to consider.

Jane's employer purchased a new calculator this month.When Jane added up the sales for the day,she was a bit confused with the new calculator and made numerous adding errors.The daily sales total for the next week were incorrectly posted to the general ledger.The general balance-related audit objective affected by this activity is