Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 14A, Problem 1P
a.
To determine
Indicate the type of error or fraud that the control serves to prevent or detect in the given controls.
a.
Expert Solution
Explanation of Solution
Internal control:
Internal control is a process of controlling the activities within the organization. Business deals with various set of activities. To perform every activity effectively, the management of the company should control and manage the activities. The control of these activities is known as an internal control.
Error or fraud in the financial statement:
When there is a misstatement of the financial statements of the company because of the intentional and unintentional error then it is known as error or fraud in the financial statement.
Indicate the type of error or fraud that the control serves to prevent or detect in the given controls:
| Control | Error or Fraud Controlled |
| 1 | This activity would provide control over the unauthorized and invalid payment of the accounts payable. |
| 2 | This activity would control over the completeness of the transactions. |
| 3 | This activity would prevent the chances of duplicate transactions. |
b.
To determine
Provide the test of control for the provided internal control of the client.
b.
Expert Solution
Explanation of Solution
Test of control:
Test of control is performed by the auditor to verify that the control process is effective and efficient enough or not. It consists of the following two activities:
- Test of control recognizes the control process required to prevent the material misstatement.
- Test of control asses that the control process is operating effectively or not.
Provide the test of control for the provided internal control of the client:
| Control | Tests of Controls |
| 1 | The auditor can test the control over the reconciliation by reviewing the |
| 2 | The auditor can test the control by randomly checking the entries in the receiving report. The auditor can randomly pick a few consecutive transactions and consider that their numbers are in sequence. |
| 3 | The auditor should review the mailing register and review the signature for the individual who mailed the checks. |
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Students have asked these similar questions
An auditor would be most likely to assess control risk at the maximum level in an electronic environment with automated system-generated information when:Select one:
a.
Fixed asset transactions are few in number, but large in dollar amount.
b.
Payables are based on many transactions and large in dollar amount.
c.
Accounts receivable records are based on many transactions and are large in dollar amount.
d.
Sales orders are initiated using predetermined, automated decision rules.
Internal auditors would most appropriately perform which of the following activities during a review of systems development activity?a. Serve on the MIS steering committee that determines what new systems are to be developed.b. Review the methodology used to monitor and control the system development function. c. Recommend specific automated procedures to be incorporated into new systems that will provide reasonable assurance that all data submitted to an application are converted to machine-readable form.d. Recommend specific operational procedures that will ensure that all data submitted for processing are converted to machine-readable form.
Listed in the table below are some common audit procedures. For each procedure below:
Identify whether it is a test of control (TOC), substantive test of transaction (STOT), analytical procedure (AP) or a test of details of balances (TODOB). Write your answer in the 2nd column of the table below.
State one audit objective that is being satisfied. Write your answer in the 3rd column of the table below.
Procedure
(a) Type of Test
(b) Audit Objective
Example: Compare the quantity and description of items on duplicate sales invoices with related shipping documents.
STOT
Accuracy
1.Foot the list of accounts payable and trace the balance to the general ledger.
2. Account for the sequence of purchase orders
3. Select a sample of purchase transactions from purchase journal and trace them to vendors’ invoices and statements
4. Exam cash payments subsequent to the balance date to see if they are related to unrecorded…
Chapter 14A Solutions
Principles Of Auditing & Other Assurance Services
Knowledge Booster
Similar questions
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