Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Auditing Accounting Lew Pherson and Vera Collier are friends who are employed by different CPS firms. One day during lunch they are discussing the importance

Auditing Accounting

Lew Pherson and Vera Collier are friends who are employed by different CPS firms. One day during lunch they are discussing the importance of internal control in determining the amount of audit evidence required for an engagement. Pherson expresses the view that internal control must be evaluated carefully in all companies, regardless of their size or whether they are publicly held, in a similar manner. His CPA requires a standard internal control questionnaire on every audit as well as a flowchart of every transaction area. In addition, he says the firm requires a careful evaluation of the system and a modification in the evidence accumulated based on the controls and deficiencies in the system. Collier responds by saying she believes that internal control cannot be adequate in many of small companies she audits; therefore, she simply ignores internal control and acts under the assumption of inadequate controls. She goes on to say, why should I spend a lot of time obtaining an understanding of internal control and assessing control risk when I know it has all kinds of weakness before I start? I would rather spend the time it takes to fill out all those forms in testing whether the statements are correct.

a. Express in general terms the most important difference between the nature of the potential controls available for large and small companies.

b. Criticize the positions taken by Pherson and collier, and express your own opinion about the similarities and differences that should exist in understanding internal control and assessing control risk for different sized companies.

c. Discuss whether Collie's approach is acceptable under existing auditing standards for either public or nonpublic companies.

d. Describe what additional procedures Pherson must perform if auditing the financial statements of a public company

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Project Management Accounting

Authors: Kevin R Callahan, Gary S Stetz, Lynne M Brooks

2nd Edition

1118078209, 9781118078204

More Books

Students also viewed these Accounting questions

Question

-7/16 + 7/8

Answered: 1 week ago

Question

Define Management or What is Management?

Answered: 1 week ago

Question

What do you understand by MBO?

Answered: 1 week ago