Assignment Question(s):
IMPORTANT NOTE: Answer in your own words, DO NOT COPY from slides, fellow students, or internet sources without proper citation.
Q1. Read the following situations and explain how the risk of material misstatement should be assessed and how detection risk could be affected by the assessment.
(The first one is answered for you to get the idea).
Kelvin is a trucking company. The company is publicly held, and growing rapidly throughout the southeast. But Richard Kelvin and his sons control 55 % of the stock. Richard is chairman of the board and CEO.He personally makes all major decisions with little consultation with the board of directors. Most of the directors, however, are either members of the Kelvin family or long-standing friends. The board confirms Richard Kelvin’s decisions.
Q2. Read the following situations relating to the audit of internal control over financial reporting, what would be the audit report you will choose as an auditor and why?
(The first one is answered for you to get the idea).
During the audit of Health Recipe Pharmaceuticals, you are surprised to find several control deficiencies in the entity’s internal control. You determine that there is a reasonable possibility that any one of them could result in a significant misstatement. Although the odds are extremely low that the deficiencies, singly or taken together, will result in a material misstatement of the entity’s financial statements, the large number of problems causes you concern. Management’s written assessment concludes that the entity’s ICFR was effective ‘as of’ the report date.