(Solution) 12-20 (Risk Assessments And Audit Strategies) The Following Risk Factors Were Identified By Various Audit Teams During The Audit Of Their Clients. | Snapessays.com


(Solution) 12-20 (Risk assessments and audit strategies) The following risk factors were identified by various audit teams during the audit of their clients.


12-20 (Risk assessments and audit strategies) The following risk factors were identified by various

 

audit teams during the audit of their clients.

 

1. The client has a strong control environment and good controls over the existence of

 

inventory.

 

2. The client is in an industry that has both significant regulatory oversight and complex

 

regulations.

 

3. The client has recently experienced turnover in its information technology group, resulting

 

in decreased segregation of duties and a deterioration of computer general controls.

 

4. The client is a private university with primarily full-time students, a small amount of

 

receivables at year-end, and good internal controls over revenues.

 

5. A company’s business plans are dependent on the success of entering new foreign markets

 

with existing products.

 

6. The client has used significant borrowing to fund expansion in a competitive industry

 

and has a narrow tolerance range regarding debt covenants.

 

7. Analytical procedures for a manufacturer show significant increases in both profit margins

 

and inventory turn days.

 

8. Inventory items are small in size and high in value.

 

CHAPTER 12 / AUDIT PROCEDURES IN RESPONSE TO ASSESSED RISKS [543]

 

9. The telecommunications client is in a capital-intensive industry, and fixed assets additions

 

involve complex accounting issues.

 

10. The audit team has experienced several attempts by management to justify marginal or

 

inappropriate accounting on the basis of immateriality.

 

11. Analytical procedures for a manufacturer show significant increases in both revenue

 

growth and accounts receivable turn days.

 

Required

 

For each risk factor (a) identify the type of misstatement that can occur and (b) an audit

 

strategy that is relevant to the risk factor.

 

EXAMPLE TYPE OF POTENTIAL AUDIT

 

RISK FACTOR MISSTATEMENT STRATEGY

 

(Use number)

 


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This question was answered on: May 23, 2022

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