External Audit -(TCO A) What is the relationship between U. S. AND International Auditing Standards?

11 question on the external audit the reference for the answer is the book ( AUDITING AND ASSURANCE SERVICES AN INTEGRATED APPROACH, 14 TH EDITION FOR ALVIN A. ARENS, RANDAL J.EILDER, MARK S.BEASLEYQuestion 1.1. (TCO A) What is the relationship
between U. S. AND International Auditing Standards?

Question 2.2. (TCO B) Alan, a CPA is
participating in an audit engagement of ABC Company. He has performed the audit
and has determined that an unqualified opinion is to be issued but he would
like to expand on the rationale for the unqualified opinion. Please describe
the five situations in which an explanatory paragraph would be necessary in an
unqualified opinion.

Question 3.3. (TCO C) Kent, CPA is a staff
auditor participating in the audit engagement of Fort, Inc. Based upon each of the circumstances below,
indicate whether or not Kent’s actions impair his independence. Explain your response for each situation:

•????????Kent’s friend, an employee of
another local accounting firm, prepares Fort’s Tax return.
•????????Kent’s sibling is the director of
Internal Auditing for Fort, Inc..

Question 4.4. (TCO D) You are a CPA, you worked 2 years for a CPA
firm doing audits and now you have just completed your first year in your own
CPA firm. Your Physician audit client, whom you just issued an Unqualified
Opinion, has just determined that his accountant has been stealing about
$300,000 per year from their Physician Medical Practice which you failed to
detect during your audit. You had warned
the Managing Partner that they did not have adequate Internal controls – are
you liable? Explain your defense and
possible legal liability.

Question 5.5. (TCO F) Sarbanes Oxley requires that per Section 404
that Internal Controls within a publicly held company are to be reviewed,
evaluated and tested at year end to insure that adequate controls are in place.
Explain and describe two of the three major methods to obtain and document
their understanding of a company’s controls.

Question 1.1. (TCO E) What is COSO? Describe the 5 elements of COSO’s Internal
Control-Integrated Framework. Provide an
example of each of those components and explain why they are important in
providing “Reliable Financial Reporting” for a company. Please provide a complete answer for full
points.

Question 2.2. (TCO G) Conducting an audit in
accordance with Generally Accepted Auditing Standards requires that the audit
is properly planned, performing preliminary upfront analytical procedures,
assessing the clients business risk and making sure that the auditors
understand the client’s business and industry.

(a)
Identify and describe at least three aspects of proper audit planning
and why they are important.
(b) Define what an analytical procedure is
and give at least three procedures that
should be performed and their purpose.
For example, comparison of last year’s Allowance for Doubtful Accounts
to this year’s Allowance for Doubtful accounts – the amount has decreased by
25%, while sales have increased by 10% from last year. How might this affect how you look at
Accounts Receivables and the related Allowance for Doubtful Accounts? Would you increase or decrease your audit
procedures?
(c) Why does an auditor need to understand
the client’s business and their industry?
Provide an industry and what risks may that industry pose to our client.

Question 3.3. (TCO H) Audit Risk consists of
inherent risk, control risk, and detection risk.
(a) Please completely define each of the
above.
(b) Indicate whether each of the statements
below is true or false and explain your position:
(1)
The risk that material misstatement will not be prevented or detected on
a timely basis by internal controls can be reduced to zero by having effective
controls in place.
(2)
Detection Risk is a function of the efficiency of an auditing procedure.
(3) Cash is more susceptible to theft than
an inventory of coal because it has greater inherent risk?
(4)
The Inherent risk of the theft of an inventory of cellphones at a mall
store is greater than the misappropriation of cash at a COSTCO Store?

Question 4.4. (TCO I) Accounts Receivable
– For each of the following, please explain if an auditor’s review of the
client’s sales cutoff would detect these problems:
(a) Would excessive goods returned for
credit be detected by a sales cut-off test – why or why not?
(b) Would unrecorded sales discounts be
detected by a sales cut-off test – why or why not?
(c) Lapping of year-end accounts receivable
be detected by a sales cut-off test – why or why not?
(d) Inflated sales for the year – could it
be detected by a sales-cut-off test – why or why not?

Question 5.5. (TCO J) One of the major problems
in a computer system is that incompatible functions may be performed by the
same individual. Identify from the below
choices the control compensating for inadequate segregation of duties in a computer
system. Explain why you have selected
your response.

(a) Echo Checks

(b) A check digit system

(c) Computer-Generated hash
totals

(d) A computer access log

Question 6.6. (TCO K) You are the Senior
Auditor for WWZ Co. and you have completed the testing of all the
accounts. However, prior to issuing your
report, what are at least five other procedures or reviews that must be performed prior to
issuing your report? Explain your
responses