7-14 7-17& 7-19 auditing standards A prospective client informs you that all off

Question

7-14 7-17& 7-19

auditing standards A prospective client informs you that all officers and employees of the co and he requests that under these circumstances you forgo a consideration ofn order to reduce the cost of an audit. Construct a logical reply to this requ mpany are be internal cont est. controls needed to 7-14. 7-15. Suggest a number of sources from which you might obtain the information nesrd 7-16. "All experienced auditors would design exactly the same audit plan (program) for prepar a description of internal control in the audit working papers. a particla audit engagement." Do you agree? Explain. 7-17. Under what circumstances are tests of controls efficient audit procedures? 7-18. How is the auditors' understanding of the client's internal control docu mented in the asfe working papers? 7-19. What is a management letter? What is the letter's significance? 7-20. List and describe the cight components of the COSO 7-21. You have discussed with the president of Vista Corruratin Enterprise Risk Management F ramewor

Explanation / Answer

7-14

Safeguarding of assets is not only an objective of internal controls. Internal control has many other important objectives assuring the reliability of accounting information and other data for effective direction of business needed by the management.

When the internal controls are not present or less effective, then the losses from the inefficiency and waste are greater than the losses from the dishonest acts by the employees.

It is a prerequisite for auditors to determine the nature, timing, extent of internal controls and also further audit procedures that are necessary for expressing an opinion on financial statements.

Bonding is only way to reimburse a company for loss attributable due to embezzlement or theft of employees. Fraud is not the reason for auditing the financial statements.

7-17 under what circumstances are test of controls efficient audit procedures?

When the amount of work involved in performing testing of controls due lower assessed level of control risk which results to reduction in substantive procedures then the test of controls are efficient.

7-19 what is management letter.

While performing an audit the auditor generally encounters many deficiencies that should be brought to the notice of the management     . A management letter is the written report given by the management to the client describing such deficiencies along with the recommendations given by the auditor for corrective action.

Management letter serves as a useful reference document for improving and implementing the internal controls in most effective and efficient way.

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