Assignment No. 4 Chapter 5 Group10

CHAPTER 5 (Assignment no.
4 - Group)
SECTION SBAC3B
GROUP 10
S. No Question No.
1 1-A
2 1-B
3 1-C
4 2
5 3
6 4
7 5
8 6
9 7
10 8
11 9
12 10
13 - 15 11
gnment no. 4 - Group)
Answer
the nature of risk response when,
- The expected sufficiency of evidence does not meet.
- The materiality level set to an account cannot help the auditor to provide reasonable assurance or to detect the mat
account.
- The level of audit risk is change due to the weak internal control
the timing of risk response when,
- There is a change in the entity’s period of reporting documents
- There is a high audit risk that the auditor need a lot of time to meet with its team and the entity’s management be
audit
the extent of risk response when,

- The internal control is weak, the auditor need to performed substantive test to provide reasonable assurance.
To introduce the unpredictability into auditor procedure, the auditor shall perform the following procedures:
-Inspect and examine the amount balances less than the normal materiality threshold.
-Perform an unannounced review of cash and other accounts
-Make a visit of walkthrough examination to check the inventory and other property plant and equipment.
-Perform random
After the end test to vendors
of reporting period, totheverify its existence.
following audit procedure can be completed:
-Applying the substantive test and ratio analysis
-Comparing the financial statement to the accounting records
-Evaluating
Audit tests thehave
journal
five entries,
differentadjusting
types used entries and ledgerwhether
to determine accounts.financial statements are fairly stated are risk ass
-Conductingtests procedures to response
of controls, substantive to risks
tests of transactions, substantive analytical procedures, and tests of details
Substantive tests of transactions, substantive analytical procedures, and tests of details of balances are substan
procedures to obtain an understanding of internal control and tests of controls are used to reduce assessed cont
substantive analytical procedures and tests of details of balances to satisfy planned detection risk. Substantive test
both control risk and planned detection risk, because they test the effectiveness of internal controls and the do
5.To assess control risk auditors based it on their understandingtransactions. of internal control. Test of controls obtain sufficient
Test of controls
evidence - Control
to support that.risk is assessed
(control proceduresby auditors based
effective on their
> control riskknowledge of internal
level reflects controls (control procedu
effectiveness)
risk level
-Sales reflects effectiveness) Control tests are sufficient/appropriate evidence to back that up.
Substantive tests of transactions is accomplished by determining whether individual transactions are effectively reco
-Accounts
in receivable
the journals, master files, and general ledger. It is performed to confirm the accuracy of a customer's accounting s
1.Observe control-related activities
tests of transactions are concerned
2. Examine documents, records, reports about classes of transactions, such as payroll, acquisitions, or cash receipts. Subs
transactions are also the audit procedures testing for financial misstatements to determine whether the 6 transactio
objectives
Substantive(occurrence,
test - Auditorcompleteness,
checks that all accuracy, posting
transactions areand summarization,
properly registered classification,
and posted in and timing)
ledger have
- there arebeen fu
six tra
transactions. The example of a substantive
objectives to remember (monetary misstatements) test of transactions for the acquisition and payment cycle is tracing amou
Since the to
vouchers auditor Assumptions
the acquisitions about the outcomes of the control tests, he or she conducts these tests at the same ti
journal.
efficient
1.Verify recording of cash receiptwith
internal control scheme few/no exceptions is presumed. The auditor will be satisfied with the substan
transactions
tests
Tests are
of consistent
details of with
balances
2. Count of period-end inventorythe assumptions
verify the endingmade, unless
balance theindividual
in an substantive tests reveal
account a misstatement.
(such as inventory, accounts receivabl
expense) on the financial statements. Tests of details of balances is the audit procedures testing for monetary misst
whether the 8 balance-related audit objectives ( existence, completeness, accuracy, classification, cutoff, detail tie-i
rights and obligations) have been satisfied for each significant account balance. Evidence is obtained from a source i
client (highly reliable). An example of a test of details of balances for the acquisition and payment cycle is to physica
of the client's fixed assets.
The examination of invoices in support of the additions and possibly the physical examination of the additions are n
In assessing the control risk, auditor must consider the three decision factors before the reduction in substantive testing. The r
The test of details is a process that auditor use to verify the details of individual transactions or balance. It is desirable to desig
Score
des to the audit of fixed asset additions. This is regularly performed on a test basis with a focus on the more significant addition
rmitted first, if the auditor can assess the risk of material misstatement relying on the operating effectiveness of control. The greater relian
etails of balances before performing test of control and substantive tests of transactions because it use to collect audit evidence to perfor
cus on the more significant additions. If individual who has an inadequate training and limited experience in accounting is respo
ectiveness of control. The greater reliance place on the effectiveness of control, the more audit evidence obtain. Second, the auditor ensu
use to collect audit evidence to perform efficient and effective audit procedure. The auditor make assumption to the result of test of con
nce in accounting is responsible for recording new acquisitions, the example size for the audit procedures should be extended t
. Second, the auditor ensure an efficient and cost-effective audit. The roles and responsibilities of the client’s organization can be help the
to the result of test of control and substantive test. It is whether the audit procedure perform effectively and there is no significant missta
es should be extended to incorporate a larger sample of the additions for the year. Furthermore, requests as to what additions
anization can be help the year-end audit work efficiently. Time and money will be saved by both the client and their external auditor. Las
ere is no significant misstatement or the result reveals that the control is weak and detect material misstatement. If the assumption doesn
sts as to what additions were made during the year might be made by the auditor of plant managers, the controller, and other
their external auditor. Lastly, the result of test of control which it determine the effectiveness of control.
t. If the assumption doesn’t meet his expectation, the amount in test of detail is need to be check and verify it again.
he controller, and other working staff. Then the auditor should Inquire about the financial records to establish that these additi
tablish that these additions were recorded as fixed assets. Care should also be taken when the repairs and maintenance expen
and maintenance expense account is examined since the absence of training may make some depreciable assets to be expense
ble assets to be expensed/discounted at the time of acquisition.

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CHAPTER 5 (Assignment no.

the extent of risk response when,

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