Professional Documents
Culture Documents
Discussion and Research Questions 5-38 (Page 179), 5-44 (Page 182)
Discussion and Research Questions 5-38 (Page 179), 5-44 (Page 182)
Discussion and Research Questions 5-38 (page 179), 5-44 (page 182)
5-38 (Classification and Reliability of Audit Evidence) The following are examples of
documents typically obtained by auditors.
Required
For each example
5-44 (Alternative Sources of Evidence) The following situations present the auditor with
alternative sources of evidence regarding a particular assertion
Required
a. For each of the following situations, identify the assertion the auditor is most
likely resting with the procedure
b. For each situation, identify which of the two sources presents the most persuasive
evidence, and briefly indicate the rationale for your answer.
4. Confirming a year-end bank balance with the client’s banking institution vs.
reviewing the client’s year-end bank statement vs. having a cut-off bank statement
as of January 20 for all activity from December 31 to January 20 sent to the
auditor.
6. Confirming the client’s year-end bank balance with the bank vs. confirming the
potential loss due to a lawsuit with the client’s outside legal counsel.
8. Reviewing all payments made to vendors and suppliers after year end to
determine if they were properly recorded as accounts payable vs. requesting
vendor statements at year end for all significant vendors from which the client
made purchases during the year.
10. For a financial institution, testing the organization’s controls for making and
recording loans vs. confirming year-end loan balances directly with customers.
Discussion and Research Questions 8-40 (page 313), and 8-44 (page 314)
Required
For each of the following situations involving computer fraud, briefly describe the
following:
a. A control procedure that would have been effective in preventing or detecting the
fraud.
b. An audit procedure that would have detected the fraud
Computer Frauds
a. A computer programmer added a module to the payroll program that started with
an “IF” statement to identify his employee number. If it were his record, the
program was instructed to multiply computed pay by 1.5, thus increasing the
programmer’s pay by 50%
b. A state health and social services department made support payments to needy
residents. A resident could be input into the system only on recommendation of a
supervising caseworker. Some caseworkers entered fictitious residents on the
system and had support payments sent to authorized addresses. The caseworkers
then cashed the support payments and eventually transferred the cash to their own
accounts.
b. What are the major limitations of using the ITF in this situation?
c. Assume that the auditor is concerned with the operation of the edit controls and is
especially concerned that the control procedures either are not functioning
effectively or are overridden by management. Would the ITF identify the problem
d. Would the ITF be useful in identifying whether or not fictitious data had been
added to the system? Explain