ACCT444 WK4 HW4 Mk
10-33
1. Information and communication
2. Control activities
3. Risk assessment
4. Control environment
5. Control activities
6. Information and communication
7. Control environment
8. Control environment
9. Risk assessment
10. Monitoring
10-41
Independent Situation
Appropriate Audit Report
Reason for Report
1.
Adverse opinion on internal control over financial reporting
PCAOB Standard 2 notes that the presence of a material misstatement not detected by the company’s internal controls is to be considered at least a significant deficiency, if not a material weakness for purposes of reporting on internal controls.
2.
Qualified or disclaimer of opinion on internal control over financial reporting
The auditor’s inability to obtain any evidence about the operating effectiveness of internal controls represents a scope limitation.
3.
Adverse opinion on internal control over financial reporting
The detection of a deficiency that will not prevent or detect a material misstatement in the financial statements meets the definition of a material weakness, which requires an adverse opinion.
4.
Unqualified opinion on internal control over financial reporting
The control deficiency was remedied and the auditor was able to obtain sufficient competent evidence that the new control operates effectively. Thus, an unqualified opinion on internal control is appropriate.
5.
Unqualified opinion on internal control over financial reporting
Because the auditor does not believe the significant deficiency in internal control is a material weakness, the auditor’s report would contain an unqualified opinion.
12-19
MISSTATEMENT
TRANSACTION-RELATED AUDIT OBJECTIVE
COMPUTER-BASED CONTROLS
A customer number on a sales invoice was transposed and, as a result, charged to the wrong customer. By the time the error was found, the original customer was no longer in business.
Recorded transactions exist
Transactions are properly posted and summarized
Key verification
Check digit
Reconciliation to
1. Information and communication
2. Control activities
3. Risk assessment
4. Control environment
5. Control activities
6. Information and communication
7. Control environment
8. Control environment
9. Risk assessment
10. Monitoring
10-41
Independent Situation
Appropriate Audit Report
Reason for Report
1.
Adverse opinion on internal control over financial reporting
PCAOB Standard 2 notes that the presence of a material misstatement not detected by the company’s internal controls is to be considered at least a significant deficiency, if not a material weakness for purposes of reporting on internal controls.
2.
Qualified or disclaimer of opinion on internal control over financial reporting
The auditor’s inability to obtain any evidence about the operating effectiveness of internal controls represents a scope limitation.
3.
Adverse opinion on internal control over financial reporting
The detection of a deficiency that will not prevent or detect a material misstatement in the financial statements meets the definition of a material weakness, which requires an adverse opinion.
4.
Unqualified opinion on internal control over financial reporting
The control deficiency was remedied and the auditor was able to obtain sufficient competent evidence that the new control operates effectively. Thus, an unqualified opinion on internal control is appropriate.
5.
Unqualified opinion on internal control over financial reporting
Because the auditor does not believe the significant deficiency in internal control is a material weakness, the auditor’s report would contain an unqualified opinion.
12-19
MISSTATEMENT
TRANSACTION-RELATED AUDIT OBJECTIVE
COMPUTER-BASED CONTROLS
A customer number on a sales invoice was transposed and, as a result, charged to the wrong customer. By the time the error was found, the original customer was no longer in business.
Recorded transactions exist
Transactions are properly posted and summarized
Key verification
Check digit
Reconciliation to