Define business risk in association with an audit

Reference no: EM131183290

Question:

1.Identify the Processing Controls associated with a Computerized System and identify the types of tests to be performed. (2) Identify the issues which an E-Commerce System presents for an auditor.

2.Business risk must be assessed in performing an audit.
(a) Define business risk in association with an audit and describe several sources of such risk.

(b) How does business risk relate to the performance of preliminary analytical procedures in an audit?

(c) There are four major areas in planning an audit engagement and there are subparts to each of the four major areas. Please identify the four major areas and the subparts that are associated with the major areas.

3. You have just been hired by a Large Regional CPA firm and you have been assigned to audit the Inventory account of $3,000,000 which represents 30% of the assets of the company. Audit standards require the auditor to consider the combined amount of misstatement early in the audit. This is known as preliminary materiality judgment.
(a) List and discuss the three main factors that affect an auditor's preliminary judgment about materiality.

(b) Would you consider the inventory account and its impact on the Balance Sheet to be an important account? If during the audit, based upon your sample of inventory you determine a "Known Misstatement" of $30,000 from sampling 100 of the 1,000 part numbers, what might be your "Most likely misstatement". (define known misstatement and likely misstatement and then apply this concept).

4. Auditing standards define a confirmation as the "process of obtaining and evaluating a direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions." What are the two assertions for which confirmation of accounts receivable balances provides primary evidence. Select one of the below options and EXPLAIN your reasons why you selected that option.
(a) Completeness and Valuation

(b) Valuation and Rights and Obligations.

(d) Existence and Completeness

5. When considering the use of Management's written representations as audit evidence about the completeness of an assertion, an auditor should understand that such representations - select one of the answers that best completes this sentence and explain your response:
(a) Constitute sufficient evidence to support the assertion when considered in combination with a sufficiently low assessed level of control risk.

(b) Complement, but do not replace, substantive tests designed to support the assertion.

(d) Replace a low assessed level of control risk as evidence to support the assertion.

6. A Remington School District employee has been charged with theft and forgery for allegedly stealing approximately $72,000 in district funds.

Mary Blaner, 51, was charged in District Court with one count of second-degree felony theft and five counts of third-degree felony forgery. She is the second school district employee to be formally charged with stealing from the district. Both individuals were charged in separate and apparently unrelated cases.

Blaner, who was the district's payroll clerk, allegedly arranged electronic direct deposits of funds for nonexistent employees that then went to her, according to the police. Blaner was a trusted employee who had worked at the district for over 10 years. (Note: she just went through a divorce and has 4 children to support. She needs money for her children and a new car and had plans to pay the money back later).

"Over the course of the last 15 months, she was able to allegedly siphon funds out of their (the district's) account into her account, and she allegedly set up fictitious employees," School district officials became suspicious when they had trouble balancing the district's account. After an internal audit, school officials came across payroll listings for workers that did not have any matching Social Security numbers.

Another school district employee, Cindy Heap, who formerly worked as an elementary school secretary, earlier was charged with theft and 11 counts of forgery in a different case, according to Gary Searle, deputy county attorney. Heap allegedly took just under $90,000 in district funds, Searle said. Heap, 32, resigned from her job.

(1) What factors allowed these frauds to occur?

(2) What do you think the school district should do in the future to prevent fraud from occurring in the future?

(3) What responsibility do you feel the current school external auditor has to detect this fraud?

(4) How have the three elements of the Fraud Triangle enabled Mary to commit this fraud?

Reference no: EM131183290

Questions Cloud

Boiling point data for halogen molecules : Consider the following boiling point data for these halogen molecules.

Prove that two open-collector ttl inverters : Using the actual output transistors of two open-collector TTL gates, show (by means of a truth table) that when connected together to an external resistor and Var, the wired connection produces an AND function.

What is wrong with this line of reasoning : the probability of being released will become 1 /2, since there will be two prisoners (including himself) whose fate is unknown and exactly one of the two will be released. What is wrong with this line of reasoning?

Develop annotated bibliography to indicate quality of source : Reflect back on the Week Two Discussion in which you shared with the class the global societal issue that you would like to further address. Explore critical insights that were shared by your peers and/or your instructor on the topic chosen and be..

Define business risk in association with an audit : Define business risk in association with an audit and describe several sources of such risk. - How does business risk relate to the performance of preliminary analytical procedures in an audit?

Create a business budget sheet using microsoft excel : Create a business budget sheet using Microsoft Excel. In the budget sheet. Create a label called "Income" and add your monthly business income in the next cell: $25,000.

Body centered structure of barium : The barium atom has a radius of 217 pm. What is the edge of the unit cell of a body centered structure of barium?

Derive a circuit that implements the boolean function : The MOS transistor is bilateral, i.e., current may flow from source to drain or from drain to source. Using this property, derive a circuit that implements the Boolean function

What is the radius of the gold atom : Gold crystallizes in a face centered structure. The edge of the unit cell is 0.407 nm. What is the radius of the gold atom?

User Account

All Pages