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I. Indicate whether each of the following statements is true or false.1. The people, who keep the financial records for an organization, are the same people who carry out an audit of those records. 2. An outside or independent auditor is only brought in when a company is having financial difficulties or when irregularities are suspected. 3. The more internal controls an organization has, the more efficient is its operation. 4. Many companies nowadays employ accountants of their own to maintain a continuous internal audit. 5. Internal auditors try to make sure that the operating sections of a company follow the policies established by management. 6. The reports of internal auditors always reach the people in management who can act on them. 7. CPAs seldom do independent auditing work. 8. An independent auditor must examine not only the financial records, but also the evidential matter that supports them. 9. The scope paragraph of an auditor's reporting letter includes both the extent of the audit and the standards that have been used to carry it out. 10. An independent auditor is not concerned with judging the efficiency of a company's internal control system. 11. The precision with which an auditor expresses his opinion is not important. 12. If a company's financial records are not in satisfactory condition, the independent auditor must state in what way they are incorrect or incomplete. 13. When an auditor's opinion is unqualified, he believes that a company's records meet the standard for fairness. 14. An unqualified opinion by an independent auditor indicates that he has found minor areas in the financial statements that are not kept according to generally accepted accounting principles. 15. A qualified opinion indicates that there were procedural omissions or variations in the financial records that have been audited. 16. An independent auditor can give a piecemeal opinion about only some aspects of the financial records. 17. A disclaimer of opinion indicates that the independent auditor cannot reach any judgment on the financial records. 18. Only very large corporations need independent audits.
II. State which of the following types of opinion an auditor should issue for each example: 1. Unqualified opinion. 2. Qualified opinion. 3. Disclaimer of opinion. 4. Disclaimer of opinion plus a piecemeal opinion. 5. Adverse opinion
1. The auditor was unable to complete his examination because the system of internal control was too poor. 2. The auditor believes that the method of depreciating fixed assets is not in conformity with generally accepted accounting principles. However, this error did not make the statement significantly misleading. 3. The auditor believes the statements are in accordance with generally accepted accounting principles, applied on a basis consistent with previous years. 4. The auditor was unable to complete his audit. However, he has satisfied himself that the inventory is correct. 5. The auditor completed his examination and believes that the assets of the company are materially overstated.
Discussion 1. What does the auditing function of accounting involve? 2. How has the attitude toward auditing changed in modern times? 3. What kind of system for checking on operating and recording jobs is maintained by many organizations? What business papers are used in this kind of system? 4. What is the practical difficulty with internal control systems? 5. What are the various functions of internal auditors? Overall, what do they try to ensure? 6. What different emphases can be placed on an internal auditor's report? 7. What weakness exists in the internal auditing system? How can management overcome this weakness? 8. Who carries out an independent audit? Who are usually the clients? 9. What does the independent accountant review? What does he or she seek to determine? 10. How is his or her opinion expressed to his clients? 11. Where does the independent auditor indicate the extent of his or her work? What does a complete examination consist of? 12. What is stated in the scope paragraph in addition to the extent of the audit? 13. What do the general categories in an independent audit cover? 14. What must an independent auditor who examines company's records follow? What else must the auditor do? 15. What do the reporting standards deal with? What is included in them? 16. What should the auditor's opinion be based on? How does he reach his conclusion? 17. What are the different categories of opinion that an auditor can reach about organization's financial records? What is included in each? 18. How is auditing useful to a business?
Date: 2015-12-24; view: 994
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