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Short Answer 9-4 31.  Identify what category of control activity each of the following belong to: 1 Management reviews the sales of each salesperson on a monthly basis. 2 Access to the cash office is restricted by entry code. 3 There is an automated stop placed on payroll if the amounts entered exceed a.
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Short Answer 8-6 Identify whether the following high risk conditions are an example of incentives/pressures, opportunities or attitudes/rationalisation risk factors: 1 The company is very vulnerable to interest rate fluctuations 2 Management has significant financial interests in the entity 3 Many asset values are based on significant estimates that involve subjective judgements 4 Management does.
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Short Answer 9-6 1 List the four procedures necessary to obtain an understanding of the entity’s internal control. 2 Explain what a transaction walk-through review consists of. Short Answer 9-7 1 Explain what an internal control questionnaire is and why it is used. 2 List three advantages of using questionnaires.     .
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11. Which of the following are the international auditing standards? a. international standards on auditing (ISAs). b. international standards on assurance engagements (ISAEs). c. international standards on related services (ISRSs). d. all of the above. 12. The primary reasons for the existence of Auditing Standards is: a. They are necessary to maintain a cost-effective service. b. They.
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22. When the audit is an initial engagement, the auditor needs to ensure that: a. opening balances do not contain misstatements that materially affect the current period’s financial statements. b. the previous period’s closing balances have been correctly brought forward. c. appropriate accounting policies are consistently applied. d. all of the above. 23. Section 302.
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Short Answer 7-3 i. The law requires the disclosure and presentation requirements for General Purpose Financial Reports outlined by the AASB. Which financial statements are required by these accounting standards? ii. Which other major piece of legislation outlines the scope of the contents of a financial report? iii. Identify one requirement of this.
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Short Answer Short Answer 9-1 The control environment means management’s overall attitude, awareness and actions regarding internal control and its importance in the entity. Identify and describe four factors that constitute part of the control environment.     .
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16. When the auditor performs an audit or review of half-year financial statements, they are not required to: a. circulate the audit report to entity members. b. consider aspects of the audit process relevant to the current audit for the forthcoming full-year financial statements. c. treat each half-year as a discrete reporting period. d..
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Short Answer Short Answer 8-1 Identify the primary considerations that apply to accepting an audit engagement. For each consideration, indicate the primary steps involved in the decision to accept or reject the engagement. Short Answer 8-2 To adequately plan an audit, the auditor should obtain sufficient knowledge of the entity and its selection and.
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16. During the course of the audit engagement, the external auditor suggests an adjustment to the financial statements. The suggestion is accepted by management without argument. This suggests that: a. the external auditor is primarily responsible for the fairness of the financial statements. b. the internal auditor has assumed responsibility for the.
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1. ASA 700 provides explanatory guidance on all of these points except: a. The form and content of the auditor’s report. b. The matters the auditor usually considers in forming an opinion. c. The training of junior audit staff. d. The auditor’s performance and reporting responsibilities. 2. Which of these items does not form part.
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16. Setting materiality levels, assessing audit risk and its components and obtaining an understanding of the internal control structure are all part of which audit stage? a. client evaluation. b. audit planning. c. collecting audit evidence d. issuing the audit report. 17. The reliance on client internal audit personnel on the audit is: a. strictly prohibited.
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Short Answer 8-7 Explain the importance of analytical procedures and why auditors may also use non-financial measures in these procedures. Short Answer 8-8 Clements & Partners are the audit firm of Manufacturing Co. and have been for 3 years. The audit firm is considering if there are any ethical or legal requirements that.
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Short Answer 7-7 A company can have a review performed as an alternative to an audit for half-year reports. What is the difference in the opinion expressed in a review? Short Answer 7-8 i. How are the disclosure and presentation requirements of general-purpose financial reports determined? ii. What does it mean that the auditor’s.
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11. Circumstances where the auditor is justified in qualifying the audit report because of an inability to obtain sufficient appropriate audit evidence would not include which of the following? a.  the auditor is appointed after the count of physical inventories has occurred b. the auditor runs out of time to follow normal.
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26. The purpose of using analytical procedures in auditing is to: a. identify inefficiencies in operations. b. test internal controls. c. identify unexpected fluctuations and relationships. d. none of the above. 27. Which of the following would not be considered an analytical procedure? a. comparing source dockets with journal entries. b. comparing payroll costs with the number.
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11. Which factor concerning boards of directors and audit committees would be considered least  influential in its impact on the control environment? a. the sex of directors. b. experience and stature of directors. c. the extent of director’s involvement and scrutiny of management’s activities. d. independence from management. 12. Which of these is not an.
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21. The least likely source of information for the auditor in obtaining an understanding of the client’s industry conditions is: a. industry Audit Guides. b. trade journals. c.  industry statistics compiled by government or private agencies. d.  data accumulated by the audit firm 22. Which of these would not be of direct interest to an.
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Short Answer 8-3 You are the senior auditor on a particular engagement. The new staff assistant who has been assigned to work on the cash area is about to begin constructing her first audit work paper. Briefly list and discuss the essential points relating to the mechanics of working paper preparation that.
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Short Answer 8-5 For each of the following, identify whether they are part of an entity’s business operations, investments or financing. 1 The entity is a guarantor for a subsidiary’s bank loan. 2 The entity is planning a takeover of a smaller company. 3 The entity recently loaned money to one of its management. 4.
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1. The initial phase of a financial statement audit involves the acceptance decision for the client in question. Which of the following is not a consideration during this phase of the audit: a. ethical considerations. b. client evaluation. c. preparation of the engagement letter. d.  determining the existence of related parties. 2. Which of the.
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26. The assessment of inherent risk requires consideration of matters that have a pervasive effect on the entity as a whole and matters that may affect only specific accounts. Which of the following is an example of a “pervasive effects” matter? a. industry of operation. b. susceptibility to misappropriation. c. sensitivity of valuations.
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6. In the investigation of a potential new client, if the client refuses to give permission to inquire of the existing auditor, or if the existing auditor does not respond fully, the prospective auditor should: a. consider the implications in making the acceptance or rejection decision. b. not accept the engagement. c. request.
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21. A way to prevent unauthorised access to computer systems is: a. good access controls. b. strong firewalls. c. controls to detect attempts at unauthorised access. d. all of the above. 22. Flowcharts should depict all of the following except: a. all operations performed in processing the class of transactions. b. the method of processing. c. the extent.
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31. Working papers could be expected to contain all of the following except: a. a working trial balance. b. schedules and analyses. c. audit memoranda and corroborating information. d. a complete copy of all the auditing standards. 32. Which of these would be considered an audit adjusting entry? a. a significant amount of inventory was found.
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6. Incompatible duties are those that allow an irregularity to be perpetrated: a. and concealed through collusive actions. b. by a single employee. c. and concealed by a single employee. d. by accounting personnel. 7. Which of the following is incorrect concerning the segregation of duties within an organisation? a. all accounting records can generally be.
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Short Answer 9-2 List the fundamental concepts that are embodied in the definition of internal control as per the COSO report: …a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: reliability of financial reporting; compliance with.
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