Each Numbered Item Below Indicates One Action an Auditor Might

question 71

Short Answer

Each numbered item below indicates one action an auditor might take as part of a financial statement audit.Which of the two lettered alternatives would be the immediate next step based on the five generic financial statement audit steps presented in the text?
1) Ask employees about the ethical tone management sets in the organization.
a.Prepare a risk/control matrix.
b.Examine the CEO's resume.2) Discuss the educational background of each member of the upper management team.
a.Outline the client's risk exposures.
b.Verify balances in accounts receivable.3) Determine if adequate separation of duties exists.
a.Prepare a systems flowchart of the sales/collection process.
b.Compute depreciation on plant assets.4) Choose transactions to verify as part of the audit.
a.Question management about their knowledge of COSO models.
b.Issue an audit report.5) Examine a systems flowchart to determine who reconciles the bank statement.
a.Verify that business processes are adequately documented.
b.Reconcile the latest bank statement.

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Definitions:

Crisis

A significant threat to operations that can have long-term, negative consequences to the company or organization involved.

Triggering Event

An occurrence that initiates a particular action, process, or situation, often causing significant change or response.

Issue Life Cycle

The progression of an issue through stages from emergence to resolution.

Emerging Stage

An initial phase of development or growth, characterized by new challenges and opportunities, typically for businesses or technologies.