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.

Recognize the role of cognitive dissonance and its mechanisms in decision-making and belief changes.

Identify the impact of self-esteem, both state and trait, on psychological well-being.

Explain the significance of self-presentation and social roles in interpersonal interactions.

Understand the role of effort and external justification in influencing attitudes and behavior.

---

Definitions:

Cycle Inventory

Cycle inventory refers to the quantity of goods a company holds to meet average demand during a specific period, part of the inventory management to balance supply and demand.

Predictable Variability

The expected fluctuations in demand or supply that can be anticipated and planned for based on historical data or trends.

Cost of Goods Sold

An accounting term representing the direct expenses related to the production of the goods sold by a company, including materials and labor.

Total Revenue

The total income generated from the sale of goods or services before any expenses are subtracted.