Reference no: EM131292910
Using the audit risk model, state the effect on control risk, inherent risk, acceptable audit risk, and planned evidence for each of the following independent events. In each of the events cirlce one letter for each of the three independent variables and planned evidence: I=increase, D=decrease, N= no effect, and C= cannot determine from the information provided.
A. The client's management materially decreased long-term contractual debt:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
B. The client changed from privately held company to a publicly held company:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
C. The auditor decided to set assessed control risk at the maximum (it was previously assessed below the maximum:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
D. The client aquired a new subsidiary located in Italy:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
E. The account balance increased materially from the preceeding year without apparent reason:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
F. You determine through the planning phase that working capital, debt-to-equity ratio and other indicators of financial condition improved during the past year:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
G. This is the second year of the engagement, and there were few misstatements found in the previous year's audit. The auditor also decided to increase reliance on internal control:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
H. The client began selling products online to customers throughits Web page during the year under audit. The online customer ordering process is not integrated with the company's accounting system. Client sales staff print out customer order information and enter that data into the sales accounting system:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
I. There has been a change in several key management personnel. You believe the management is somehow lacking in personal integrity compared with the previous management. You believe it is still appropriate to do the audit:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
J. In discussion with management, you conclude that management is planning to sell the business in the next few months. Because of the planned changes, several key accounting personnel quit several months ago for alternative employment. You also observe that the gross margin percent has significantly increased compared with that of the preceding year:
Control risk IDNC Acceptable audit risk IDNC
Inherent risk IDNC Planned evidence IDNC
Carson is claimed as dependent on his parents tax return
: In 2016, Carson is claimed as a dependent on his parent's tax return. His parents' ordinary income marginal tax rate is 28 percent. Carson's parents provided most of his support. What is Carson's tax liability for the year in each of the following al..
|
Calculate the break even sales
: Erin Shelton, Inc., wants to earn a target profit of $800,000 this year. The company’s fixed costs are expected to be $1,000,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Inc., earned $700,000 in profit last year. C..
|
Defined benefit pension plan experienced
: City of Dallas Police and Fireman Defined Benefit Pension Plan experienced a difference between its expected Projected Benefit Obligation and its actual Projected Benefit Obligation during the calendar year 2015. The actuary notified City of Dallas P..
|
What are the net present value-internal rate of return
: Centaur Corporation is considering the purchase of an annex to one of its buildings. The annex will cost $10,000,000. Centaur estimates that the building annex will save it $900,000 in rent in its first year, and that the rent savings will increase b..
|
Audit risk model-state effect on control risk-inherent risk
: Using the audit risk model, state the effect on control risk, inherent risk, acceptable audit risk, and planned evidence for each of the following independent events. In each of the events cirlce one letter for each of the three independent variables..
|
Renders volunteer legal services
: Daisy is an attorney who renders volunteer legal services to a Legal Aid Society, which provides legal advice to low-income individuals. The Legal Aid Society is a qualified charitable organization. What is Daisy's charitable contribution for the yea..
|
Cash-method taxpayer-what is taxable income
: Lori is a single, cash-method taxpayer . On April 11, 2013, Joyce paid $220 state income taxes with her 2012 state income tax return. During 2013, Lori had $2,600 in state income taxes withheld. On April 13, 2014, Lori paid $1,200 with her 2013 state..
|
Advantages and disadvantages of ortegas proposal
: Nature’s Own manufactures organic fruit preserves sold primarily through health food stores and on the Web. The company closes for two weeks each December to enable employees to spend time with their families over the holiday season. What are the adv..
|
Capital gain from the sale of city atlanta bonds
: Holly inherited $10,000 of City of Atlanta bonds in February. In March, she received interest of $500, and in April she sold the bonds at a $200 gain. Holly redeemed Series EE U.S. savings bonds that she had purchased several years ago. The accumulat..
|