Purchase Solution

Auditing standard 5 - Internal Controls for Integrated Audit

Not what you're looking for?

Ask Custom Question

Auditing standard 5 - Internal controls for integrated audit

What would you do if you were the CFO of the XYZ company that is listed on the stock exchange and find through the yearend audit by an independent Audit firm that a 3,000 dollar entry went to the wrong account? In this case the CFO decided not to reopen the books to make this correction. Was this decision by the CFO correct or not?

Who is Edgar and what does Edgar have to do with 8K, 10K and 10Q?
How can Edgar help you in getting information?

The new Auditing Standard # 5
Why should accountants want to know what is contained in this standard?

Accountants need to know the provisions of this auditing standard so they can be an active participant when working with the independent auditors. In addition the auditing standard provided important information that will guide the accountant (CFO) in developing and installing the company's internal controls.
In accounting we all know that no matter how hard you try there will be errors. When they are discovered during the year they occurred, the accounting entries are made to correct the error.
How would it work if the error was discovered during the yearend audit or after the books were closed?
Now do you drill out the concrete to get the penny which will cost much more than the penny is worth or do you just do nothing?

Purchase this Solution

Solution Summary

Your tutorial is 438 words plus a reference. Your discussion talks about internal controls, materiality, cost/benefit and audit adjustments and how they are handled. The rule for handling errors found during audits is mentioned.

Solution Preview

What would you do if you were the CFO of the XYZ company that is listed on the stock exchange and find through the yearend audit by an independent Audit firm that a 3,000 dollar entry went to the wrong account? In this case the CFO decided not to reopen the books to make this correction. Was this decision by the CFO correct or not?

A: The $3,000 may not have been material to the financial statements (not big enough to make a difference to a decision) and so it may have been correct to not worry about reclassifying the entry. However, the CFO should investigate the controls that permitted such an error to occur and not be detected. It is a breach of the internal controls over financial reporting.

Who is Edgar and what does Edgar have to do with 8K, 10K and 10Q?
How can Edgar help you in getting information?

A: EDGAR is not a person EDGAR is an ...

Solution provided by:
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution


Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Lean your Process

This quiz will help you understand the basic concepts of Lean.