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Discuss the implications of this situation for the audit and audit report.
Distinguish between sampling risk and professional judgment errors (nonsampling) risk.
Give three examples of conditions and events that may indicate the existence of business risks.
What steps should an auditor perform to identify the risk of material misstatement due to fraud?
Marv Jackal, CPA, determines that a number of risks of material misstatement are pervasive to the overall financial statements.
Why is independence such an important requirement for auditors? How does independence relate to the agency relationship between owners and managers?
Define audit risk and materiality. How are these concepts reflected in the auditor's report?
Briefly describe why on most audit engagements an auditor tests only a sample of transactions that occurred.
Which kind of audit report should the auditor issue under these circumstances?
Discuss the factors that may make an audit necessary and potentially valuable for the company. Be sure to consider the concept of information risk.
What characteristics of evidence should an auditor be concerned with when searching for and evaluating audit evidence?
Describe how audit procedures designed for one purpose might also provide evidence for other purposes. Give an example.
Briefly discuss the key events that led up to the Sarbanes-Oxley Act of 2002 and the creation of the PCAOB.
How does the auditors' opinion recognize this absence of absolute accuracy?
Assess the failure of the firm's accounting information system to prevent the related fraud / embezzlement.
What qualitative factors might cause an account that is greater than materiality to be considered not significant?
What types of evidence or impressions exist (or do not exist) that high moral standards are included in the code of ethics?
Wayside Construction Company policy calls for project supervisors to purchase the equipment needed for construction jobs.
The officer who signs checks need not examine the payment packet because he is confident the amounts are correct.
While reviewing the records of Discount Pharmacy, you find that the same employee orders merchandise and approves invoices for payment.
Identify the weakness that gives an employee the best opportunity to steal cash, and state how to prevent such a theft.
As a consultant for San Marino, write a memo to convince Key of the company's need for a system of internal control.
As a consultant for Meyer's Department Store, write a memo to the president explaining how internal controls safeguard assets.
Identify the missing internal control characteristics in each situation. Identify the possible problem caused by each control weakness.
Write a memo to the company president identifying the internal control weakness in this situation.