Question

In: Accounting

Auditing Questions 1) What do you call the type of organization that keeps track of another...

Auditing Questions

1) What do you call the type of organization that keeps track of another company's equity-related transactions?

2) What area do we always assume that risks of fraud exist and that if we do not assume, we need to document our conclusion?

3) What statistical distribution pertains to the Test of Controls?

4) What does PPC stand for?

5) Which publicly traded companies are required to have their internal control audited?

Solutions

Expert Solution

Answer to 1:

The type of organisation that keep a track of Company's equity related transaction would be Accountant or Equity Analyst. Basically accountant keeps track of flow of funds with respect to raising of equity funds as well as redemption or buy back. Equity analyst are considered for valuation of equity for due diligence process or for acqusitions, mergers, consolidation etc.

Answer to 2:

Fraud may be defined as an intentional act by one or more individuals amoung management, those with charge with governance,employees or third parties , involving the use or deception to obtain an illegal advantage.

The auditor is concerned with fraud that causes a material misstatement in the Financial Statements. Two types of intentional misstatements are relevant to auditor- misstatements resulting from i)fraudulent Financial Reporting ii)missappropriation of funds.

The areas we may assume risks of fraud exists arise from -a) manipulation, falsification or alteration of accounting record or supporting documents b) misrepresentation or intentional omission c) Intentional misapplication of accounting principles.

The modalities could be by way of-

  • Recording fictitious journal entries close to the end of accounting period to manipulate operating results.
  • Altering terms and records related to unusual transaction
  • Concealing or not disclosing facts that could affect the amount recorded in Financial Statements

Answer to 3:

Statistical distribution pertaining to test of Controls:

Sampling : Sampling is a statistical method used in auditing to test whether Company's internal control are well in place.

While designing and performing test of Control, the auditor shall perform other procedures in combination with enquiry to obtain evidence about a)how the control was applied b) consistency with which it was applied and determine whether controls to be tested depends upon other controls and the means for selecting items for testing that are effective in meeting the objectives of procedures. The auditor shall consider matters including the characteristics of population to be tested, the frequency of the population and expected rate of deviation.

Answer to 4:

PPC in audit stands for Pay per Click Audit. It is the process of account reviewal, going through areas which were previously overlooked and seeking new features to improve performance. Auditing the method of charging for online advertisement based on number of clicks. A model of internet marketing in which advertisers pay revenues each time their site is visited and link is clicked which displays adds. One of the most popular PPC Model would be search engine like Google Ad's.

Answer to 5:

All Securities Exchange Commission (SEC) registered public Companies are required to have their internal control audited.

Further Companies meeting threshold limits must involve auditors to gets its internal control audited.


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