Magnitude of An Omission or Misstatement of Accounting Information
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Magnitude of An Omission or Misstatement of Accounting Information
Question Description
Materiality deals with the “magnitude of an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement”.
In auditing account balances of the client and making judgments as to what has to be adjusted or not, the auditor has to evaluate the materiality of proposed adjustments and the extent to which adjustments will be required of the client. Those proposed adjustments that are not material are below the recognition threshold and by definition don’t require adjustment. Overall planning materiality is determined at the beginning of the audit and then allocated to account balances using various methods.
Auditing standards (ISA 320 Materiality in Planning and Performing an Audit) explain the concept of materiality in the following manner:
Misstatements, including omissions, are considered to be material if they individually or in the aggregate, could reasonably be expected to influence the economic decision of users taken on the basis of the financial statements. Judgments about materiality are made in light of surrounding circumstances, and are affected by the size or nature of a misstatement, or a combination of both.
Control environment
One of the elements of an organization’s control system is the “control environment.” Identify at least four factors that the auditor should consider when reviewing the control environment and discuss how the auditor would relate this review to the assessment of control risk.
ANS:
The factors that an auditor should consider when reviewing the control environment would include:
· management’s philosophy and operating style. · the entity’s organization structure. · the functioning of the board of directors and its committees. · methods of assigning authority and responsibility. · management’s control methods for monitoring and following up on performance, including internal auditing. · personnel policies and practices. · external influences such as bank regulatory agencies. The auditor would examine his or her findings relating to each of the listed factors in determining whether control risk was high, medium or low. For example, if the philosophy of management placed little priority on internal controls the auditor would be concerned about control risk.
Use of audit tools
Jen Staples, is an auditor at King and Sheets, LLP. King and Sheets is engaged to perform an audit of the First national Bank of the Everglades which has very complex systems and technology in place related to its financial accounting and operations. Jen has information systems skills and experience in performing audits in such an environment. Discuss how Jen might use audit tools to perform procedures of FNB of the Everglades.
ANS:
Jen will most likely utilize generalized audit software for the following:
1. To sample the savings and checking account population for confirmations 2. To sample the loan account population for confirmations. 3. To electronically foot the subsidiary ledger of loans receivable. 4. To electronically analyze the loans receivable outstanding for past due accounts in order to evaluate the reserve for loan losses account. 5. To analyze the interest rate field for outliers such as percentages exceeding a certain range. 6. To analyze customer fields for missing data such as tax ID or statement address. 7. To derive statistics such as the average of all savings account balances for analysis.
4.Fraud consideration by auditors
John Beasley is interviewing with public accounting firms to become an auditor. John does not believe that fraud is a “big deal” in client organizations and argues that most individuals in management of companies are “honest people”. He believes that auditors are becoming too cynical.
Describe your response to John’s attitude and discuss the major types of fraud that occur in companies.
ANS:
Audit firms have taken criticism for failing to discover material frauds. Auditors have a greater responsibility to plan the audit to consider and detect fraud. This is accomplished partially by the auditor’s use of professional skepticism. Professional skepticism is not necessarily being cynical, it is performing an audit with a questioning mind.]
It means that the auditors will obtain persuasive evidence to corroborate management responses to inquiries and to increase the sufficiency of substantive audit evidence. Professional skepticism is exhibited in the auditor’s assumption that honesty in people is not a given. Auditors must not only go beyond the evidence in front of them, they must have the mindset of the possibility of fraud in all financial statement engagements.
It must also be mentioned that John may not be accepted by a public accounting firm because his attitude toward fraud is not rigorous enough for the profession.
John must realize that, quite often, fraud in organizations usually takes place in one of three areas:
– Defalcation such as corruption such as bribery or conflicts of interest. – Defalcation such as asset misappropriation such as theft and misuse of assets. – Fraudulent financial reporting such as the overstatement of certain assets and revenues and the understatement of certain liabilities and expenses.
Write 4 of each answers into 4 short essays(i think about less than 100 words per each) that is easy to be memorized ,as simplified as possible. thanks
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
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