Question
12-19 (Objectives 12-2 , 12-3, 12-4, 12-5) The following are general questions about assessing control risk, testing controls, and reporting on internal controls. Choose the
12-19 (Objectives 12-2 , 12-3, 12-4, 12-5) The following are general questions about assessing control risk, testing controls, and reporting on internal controls. Choose the best response.
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During the planning stage of an audit, the auditor initially assessed both inherent risk and control risk at a high level. Further testing of the clients internal controls led the auditor to reduce the assessment of control risk. Which of the following will most likely occur as a result?
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The auditor may reduce the assessment of inherent risk to match the control risk, since they were assessed at the same level during the initial planning.
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The auditor may decrease the allowed level of detection risk.
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The auditor may rely solely on analytical procedures, with no substantive procedures performed.
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The auditor may reduce the amount of substantive procedures performed.
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In which of the following scenarios would an auditor most likely increase tests of controls?
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When the clients IT system is extensively integrated throughout the companys accounting system
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When the clients accounting system is largely based on manual processes
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When the auditor has decided not to rely on internal controls and instead elects to increase substantive testing
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When the auditors assessment of inherent risk is low
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Jefferson, CPA, has identified five significant deficiencies in internal control during the audit of Portico Industries, a nonpublic company. Two of these conditions are considered to be material weaknesses. Which best describes Jeffersons communication requirements?
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Communicate the two material weaknesses to Porticos management and those charged with governance, but not the three significant deficiencies that are not material weaknesses.
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Communicate all five significant deficiencies to Porticos management and those charged with governance, distinguishing between material weaknesses and significant deficiencies.
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Communicate all five significant deficiencies to Porticos management and those charged with governance, but only require a management response with respect to the two material weaknesses.
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Communicate all five significant deficiencies to Porticos management and those charged with governance, without distinction among the deficiencies.
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