Chapter 9 Flashcards
Internal control communications and reports
What does section 404 of the Sarbanes Oxley Act 2002 requires of an issuer in each annual report?
Managements assessment of the design and effectiveness of internal control over financial reporting.
The auditor report states that?
Because of its inherent limitations, internal control over financial reporting may not prevent or detect and correct misstatements.
What are some matters that an auditor should communicate to those charged with governance?
Material corrected misstatements that were brought to the attention of management as a result of audit procedures.
Which information is relevant when gathering data for the report on the service organizations internal control?
Service organization systems calculate accounts receivable balance.
By understanding how the service organization system calculates accounts receivable, the auditor can evaluate the associated internal controls.
If during the audit of internal controls integrated with the audit of financial statements, the auditor discovered a material weakness in internal control. The auditor most likely will express which type of opinion?
Adverse opinion on internal control.
Material weakness requires the auditor to express an adverse opinion on the effectiveness of internal control.
Material weaknesses are significant control deficiencies that result in more than a remote chance that material misstatements will result in the financial statements.
Which matter would an auditor consider to be a significant deficiency or material weakness to be communicated to those charged with governance?
Evidence of lack of objectivity by those responsible for accounting decisions.
Failures in internal control include deficiencies in internal control design, and failures in the operation of internal control.
A second type of is evidence of undue bias, or lack of objectivity by those responsible for accounting decisions.
What is a true statement about auditors communication of material weakness in internal control?
Suggested corrective action for managements consideration concerning a material weakness need not be communicated to the client.
