Audit

Nikki Utt

Chapter 2 and 3 Homework

Chapter 2 Multiple Choice

1. B

2. C

3. A

4. C

5. C

6. D

7. D

8. B

9. A

10. B

Case 1:

Price Waterhouse (for blank spaces)

Once his concerns feel upon deaf ears amongst the audit committee, I would advise Mr. Eatough to file a formal complaint with the SEC (Securities Exchange Commission). The company clearly violated the IIA’s International Professional Practices Frameworks code of ethics by not performing work with honesty and integrity. The company should have investigated the increasing profits to ensure they were valid rather than choosing to mask the problem by hiding the money in a reserve account. This decision either causes their financial statements to be over or understated depending on the overall profits each month. Distorted financial statements affect the company’s stakeholders and any decisions made.

The company also needs to have clear processes on the reserve account (how it will be managed and used) and have clear accountability for such issues. No one appears to be taking accountability for the issues at hand including the accounting staff. As the Chief Audit Executive Mr. Eathough is doing his best to ensure, the company is in conformance with the IIA’s IPPF standards the audit committee needs to have ultimate accountability.

Chapter 3 Multiple Choice

1. C

2. A

3. C

4. B

5. B

6. C

7. A

Discussion Question # 7

The CAE of PJS Company is working with senior management and the board to develop a combined assurance model and has asked you for advice. More specifically, he has asked you to respond to the following questions.

a. No, the internal auditor should not postpone assurance engagements in areas of the company for which other assurance providers have already planned assurance activities. When the all of the organizations assurance providers work together they can reduce fatigue, and work can be integrated for a...