Abbott & Partners audit firm has audited Pretty Valley Shire council for two years, performing both a statutory audit of the financial reports and a compliance audit for the government department in charge of local councils’ landfill waste disposal sites. In all previous control testing, no exceptions were detected. The junior auditor on the engagement has suggested that no work on internal controls is required because last year’s evidence will be sufficient. Required: Explain why the junior auditor’s suggestion is not appropriate.

Abbott & Partners audit firm has audited Pretty Valley Shire council for two years, performing both a statutory audit of the financial reports and a compliance audit for the government department in charge of local councils’ landfill waste disposal sites. In all previous control testing, no exceptions were detected. The junior auditor on the engagement has suggested that no work on internal controls is required because last year’s evidence will be sufficient. Required: Explain why the junior auditor’s suggestion is not appropriate.

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter1: Comprehensive Cases

Section1.10: Dhb Industries, Inc.

Problem 3Q

See similar textbooks

Similar questions

Best Wood Furniture, Inc., a non-issuer that produces wood furniture, is undergoing a year 2 audit. The situations below describe changes made during year 2 that may or may not contribute to audit risk. For each situation, select the impact, if any, that the situation has on a specific component of audit risk for the year 2 audit. Selections are for once, more than once, or not at all. Consider each situation independently. Situation Impact on audit risk In year 2, the auditor noted that the company's newly hired purchasing agent was not obtaining competitive bids for all major purchase requisitions as required. Early in year 2, the company expanded its warranty program to cover additional major products in an effort to increase sales. The audit partner decided that the audit team needed to perform additional tests of detail over payroll in addition to the substantive analytical procedures done last year over payroll.…
The internal auditors of Tantacle Electrical Company report to the controller. Because ofchanges made in the past year to several of the transaction processing programs, the internalauditors created a new test data set. The external auditors requested that the old date set alsobe run. The internal auditors, embarrassed, explained that they overwrote the original testdata set.Required:Outline any potential risks and determine the courses of action the external auditor shouldtake.
The internal auditors of Brown Electrical Company report to the controller. Because of changes made in the past year to several of the transaction processing programs, the internal auditors created a new test data set. The external auditors requested that the old data set also be run. The internal auditors, embarrassed, explained that they overwrote the original test data set. Required: Outline any potential risks, and determine the courses of action the external auditor should take.
Sandoval Research is required to file its audited financial statements with the Government Accountability Office. Cain & Scutaro, CPAs has been hired to perform the engagement for the year ending December 31, 20x7. Cain & Scutaro has identified several threats to its independence with respect to Sandoval. which of the following potential safeguards might be effective in reducing threats to an acceptable level? a. Consulting with an independent third party. b. Having a professional staff member who was a member of the audit team review the work performed. c. Having a professional staff member who was a member of the audit team review the work performed .d. Allowing a member of the audit tem to have a
The internal auditors of Brown Electrical Company report to the controller. Due to changes made in the past year to several of the transaction processing programs, the internal auditors created a new test data set. The external auditors requested that the old data set also be run. The internal auditors embarrassingly explained that they overwrote the original test data set. Required: Outline any potential exposures and deter- mine the courses of action the external audi- tor should take.
Subsequent Events, Subsequently Discovered Facts, and Omitted Procedures. Jay Ralph completed the December 31, 2017, audit of Raider Company on February 3, 2018; Raider’s financial statements and Ralph’s reports on Raider’s financial statements and internal control over financial reporting were released on February 12, 2018. During April 2018, Ralph’s firm conducted a quality review over selected audits that had been completed during the most recent year, and the audit of Raider Company was randomly selected for review. The reviewer identified the following matters that Ralph had not addressed during the audit of Raider:a. On February 9, 2018, Ralph learned of the following events during his postaudit meeting with Raider’s chief operating officer.1. A class-action lawsuit was brought against Raider Company by some of its former employees for workplace discrimination. An attorney on behalf of a class of employees filed the lawsuit on January 10, 2018. The letter from Raider’s attorneys…
The internal auditors of Tantacle Electrical Company report to the controller. Because of changes made in the past year to several of the transaction processing programs, the internal auditors created a new test data set. The external auditors requested that the old date set also be run. The internal auditors, embarrassed, explained that they overwrote the original test data set. a) Determine the courses of action the external auditor should take.
Field, CPA, is auditing the financial statements of MillerMailorder, Inc. (MMI). Field has compiled a list of possible inherentand fraud risks in the revenue cycle that may result in the misstatementof MMI’s financial statements and a corresponding list ofinternal controls, which, if properly designed and implemented,could assist MMI in preventing or detecting material misstatements.For each risk numbered 1 through 15 in column 1, select one internalcontrol from column 2 (labeled a. through t.), which, if properlydesigned and implemented, most likely could assist MMI in preventingor detecting material misstatements. Internal controls can beselected for more than one risk.
(J) Kim Bryan, a new staff auditor, is confused by the inconsistency of the three audit partners to whom she has been assigned on her first three audit engagements. On the first engagement, she spent a considerable amount of time in the audit of cash disbursements by examining cancelled cheques and supporting documentation, but almost no time was spent on the verification of property, plant, and equipment. On the second engagement, a different partner had her do less intensive tests in the cash disbursements area and take smaller sample sizes than in the first audit even though the company was much larger. On her most recent engagement under a third audit partner, there was a thorough test of cash disbursement transactions, far beyond that of the other two audits, and an extensive verification of property, plant, and equipment. In fact, this partner insisted on a complete physical examination of all property, plant, and equipment recorded on the books. The total audit time on the most…
During the most recent year's audit of Hoover Enterprises, senior management has advised the auditors that a new and more effective system of internal control has been designed and implemented by external consultants and the internal audit function. As a result of this information, what approach might the auditing firm take with respect to internal control? O The external auditors will be required to obtain written assurances from senior management, documenting the effectiveness of the new system of internal control, for inclusion in the audit file. O The auditor is likely to proceed with testing of the new controls, and if the new system is determined to be robust and effective, the auditor will issue a qualified opinion on internal control. O The auditor may presume that their previous understanding of internal control is no longer valid, and will likely amend audit procedures to document the effectiveness of the new system. O The external auditors will focus the audit time and…
Consider the following independent situations relating to the audit of five different audit clients for year ended 30 June 20X8. Assume that all the situations are material. For each of the above cases, state the appropriate audit opinion that the auditor would require. Give reasons 1. new client has changed its valuation method of property, plant and equipment. It has adopted the Fair Value Revaluation Model to replace the Historic cost measurement method. Whilst the auditor does not object to the change in the valuation model, the new method has a material effect on the financial statements and has not been disclosed. A special meeting was held between the CFO and the Finance Team and the Lead Partner from the Audit team, but nothing was resolved 2. (ii) A new start-up company specialising in air-drone mail/package delivery has grown strongly in the past year. Over the past three years the company has made consistent losses, borrowed heavily, experienced staff turnover and dealt with…
For the following independent situations, assume that you are the audit partner on the engagement: 1. The client has changed from double declining balance to straight line depreciation for its equipment. The effect on this year’s income is material, and no information is disclosed in footnotes related to the change. You believed the change aligns with change in usage pattern of the equipment. Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion.