(10-13) Read the following five cases and questions. Case 11 Significantly fewer responses to confirmation requests are received than expected. Case 21 Transactions selected for testing are not supported by proper documentation. Case 3] Significant deficiencies in internal control previously communicated to management are not corrected. Case 4 Differences between reconciliations of control accounts and subsidiary records are not investigated. [Case 5] Negative confirmation requests yield fewer responses than in the prior year's audit. 10. Choose correct or incorrect statements. @ (Case 1] is an example that an auditor may suspect that material misstatements arising from fraud exist in a client's financial statements. On the contrary, [Case 5) corresponds to a reduced likelihood of material misstatement, Because responses to negative confirmations are only received when there are discrepancies, a lower response rate of the negative confirmations likely would be indicative of fewer problems with accounts receivable. 6 A. Correct statement Correct statement B. Incorrect statement Incorrect statement C. Incorrect statement Correct statement D. Correct statement Incorrect statement 11. Choose correct or incorrect statements. @ Case 3] vs. [Case 5) : Of these cases, an auditor may evaluate that (Case 3] situation is more suspicious about material misstatements of the client's financial statements than (Case 5] situation. [Case 1] vs. [Case 2] : Of these cases, an auditor may evaluate that (Case 1] situation is more suspicious about material misstatements of the client's financial statements than (Case 2] situation. In [Case 4]. This case is just simple mistakes of client's employees. Therefore, Case 4] is not an example to be suspicious about material misstatement of the client's financial statements. b A. Correct statement Correct statement Incorrect statement B. Incorrect statement Incorrect statement Incorrect statement C. Correct statement Incorrect statement Incorrect statement D. Incorrect statement Correct statement Correct statement 12. Choose correct or incorrect statements. @ If client's internal auditor produce many exception report, this imply that client's internal control system is poorly designed and operated. 6 'Separation of authorization, recording and custody' is no control environment, instead, this element is control activity. 6 A. Correct statement Correct statement B. Incorrect statement Incorrect statement C. Incorrect statement Correct statement D. Correct statement Incorrect statement