the client is a large company with sophisticated internal controls. the auditor does an extensive amount...

the client is a large company with sophisticated internal controls. the auditor does an extensive amount of work to understand internal control and the same level of work to test controls. the control risk used in this situation is most likely

a) at a level determined at a later date

b) at the lowest possible level

c) at the maximum level

d) at the level assessed due to the understanding

Solutions

Expert Solution

As per infomation given in question,

the client is a large company - Large companies have greater risk of material misstatement because even a small loophole in system can cause loss of millions. So, it increases control risk.

But it is also given the the company has sophisticated internal control in place - which reduces chances of fraud or misstatement in the company. So, it decreases the control risk.

Then it is given that the auditor also has done extensive amount of work to understand internal control - which signifies that the auditor is aware of internal control in place and if there is any loophole in the system, there is a greater possibility that it came to notice of auditor in this process. So, it reduces the control risk.

and it is also given that he also performed the same level of work for test control - which signifies he has done extensive amount of work on test controls also. Performed test controls also provides auditor with greater confidence on the internal control system in place. So, this also reduces the control risk.

So, by concluding the information given in question, it can be said that the control risk in this situation will most likely at the lowest possible level.

ekkarill92 answered 10 months ago

Next > < Previous

Related Solutions

You are an auditor studying the internal controls of a client receiving department where inventory purchases...

You are an auditor studying the internal controls of a client receiving department where inventory purchases are received from vendors. You discover that this department merely unloads inventory from trucks and moves it by forklift to the inventory storage area. Clearly answer and explain each of the following: A.) What properly altered document should be sent to the receiving department prior to arrival of any inventory and what is its purpose? B.) What document should be prepared in receiving after...

List 10 internal controls for a landscape company with 10 employees, a large amount of supplies,...

List 10 internal controls for a landscape company with 10 employees, a large amount of supplies, and a large client base. Explain why you chose each control.

(internal controls) answer the questions below: - controls of the client company appear strong. Auditors tested...

(internal controls) answer the questions below: - controls of the client company appear strong. Auditors tested the controls and found them & operate effrctively a.is the assess levek if Control risk High or Low? b. is acceptable detection risk high or low? c. Based on the acceptable detection risk, explain the scope (nature,Timing,extent) of substantive procedures to be performed? -Controls of the client company appear strong, auditors decide not to test them. a.is the assess levek if Control risk High...

The auditor is required to render an opinion on the system of internal controls (for public...

The auditor is required to render an opinion on the system of internal controls (for public companies). Which of the following would result in an adverse opinion being issued by an auditor related to internal controls? The control risk is assessed at a low level. The tests of controls support the documented understanding of controls. There is a material weakness in the design or operation of controls. A confirmation request is not returned to the auditor in a prompt manner.

The following internal controls were identified by the auditor while gaining an understanding of internal control...

The following internal controls were identified by the auditor while gaining an understanding of internal control for the sales cycle. Access to the customer master file is restricted to authorized personnel. Customers are added to the master file only after appropriate approval, including adequate background and credit checks. Sales are made only to approved customers. The computer system rejects orders if the customer number is invalid or the order exceeds the customer’s approved credit limit. The computer matches the products...

Briefly describe the purpose of internal controls in a company and the importance of internal controls...

Briefly describe the purpose of internal controls in a company and the importance of internal controls as related to cash.

As an internal auditor, you have been assigned to evaluate the controls and operation of a...

As an internal auditor, you have been assigned to evaluate the controls and operation of a computer payroll system. To test the computer systems and programs, you submit independently created test transactions with regular data in a normal production run. What would be transactions in a payroll system? What is this audit technique called? List advantages and disadvantages of this technique. Give at least one other concurrent audit technique and how it could be applied specifically to the cycle your...

After the auditor has prepared a flowchart of the accounting procedures and internal controls surrounding the...

After the auditor has prepared a flowchart of the accounting procedures and internal controls surrounding the revenue process and has evaluated the design of the system, he or she decides to test controls. The auditor would perform tests of controls on all internal controls: that are most risky and that the auditor plans to rely on. that seem to be functioning. that would assist in preventing fraud. documented in the flowchart.

An internal auditor is investigating the performance of a division with an unusually large increase in...

An internal auditor is investigating the performance of a division with an unusually large increase in sales, gross margin, and profit. Assume that the analysis shows unusually high sales and gross margin during the months of November and December and the internal auditor wishes to investigate further. Which of the following engagement procedures will be most effective in analyzing whether fraudulent sales may have been recorded? A. Take a sample of shipping documents and compare them with the related sales...

Subjects