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Midterm Exam - Acctg 115

The document contains the answers to multiple choice and discussion questions for an auditing exam, including identifying the roles of management, the audit committee, external auditors, and internal auditors. It also discusses why an auditor cannot remain independent if married to an employee of an auditing client and lists the key concepts of existence or occurrence, completeness, rights and obligations, valuation or allocation, and presentation and disclosure as it relates to internal controls over financial reporting.

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Joody Catacutan
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148 views2 pages

Midterm Exam - Acctg 115

The document contains the answers to multiple choice and discussion questions for an auditing exam, including identifying the roles of management, the audit committee, external auditors, and internal auditors. It also discusses why an auditor cannot remain independent if married to an employee of an auditing client and lists the key concepts of existence or occurrence, completeness, rights and obligations, valuation or allocation, and presentation and disclosure as it relates to internal controls over financial reporting.

Uploaded by

Joody Catacutan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Joody S. Catacutan.

BSA-3A
Midterm Examination – Auditing in CIS Environment
Answers:
1. A
2. B
3. B
4. B
5. B
6. C
7. C
8. A
9. C
10. B

Problem 1
A.
I. Management is responsible for establishing and implementing management
processes based on four key organizational functional areas which are planning,
organizing, leading and controlling. Management plays important role because
management will be developing, maintaining, and monitoring the internal controls
of Micro Dynamics that have been implemented. Management is responsible for
maintaining an effective system of internal control that ensures financial data is
accurate, assets are protected, and transactions are properly authorized and
documented in accordance with rules and regulations.
II. The audit committee's major responsibility is to manage the financial reporting
process, audit process, internal control system, and compliance with laws and
regulations. They also review and approve internal audit, guaranteeing that the
internal auditor may work freely and objectively and has all the resources and
information it needs to complete its work, and act in accordance with appropriate
professional standards for internal auditors.
III. External auditor reviews and verifies that a firm's internal controls, processes,
guidelines, and policies are adequate, effective, and compliant with government
regulations, industry standards, and business policies.
IV. Internal audit department conducts operational and financial audits to ensure that
set policies and procedures are followed, and then submits its findings and
recommendations to management or the audit committee for evaluation and
corrective action.
B. The audit committee at Micro Dynamics is in charge of overseeing the company's
financial reporting, as well as the associated risks, internal controls, compliances, and
ethics. The committee works with management and auditors to prepare financial reports
that follow accounting guidelines. The committee also assesses management's
examination of important issues and judgments in financial reports, the impact of
accounting and regulatory actions on financial statements, and the audit's progress and
final audit results. And also, the audit committee should be aware of the company's
management's processes and internal controls to verify that the financial reports are
accurate.
Discussion
1. Most accounting firms allow married employees to work for the firm. However, they
do not allow an employee to remain working for them if he or she marries an employee
of one of their auditing clients because the firm must retain its independence from its
clients. If the auditor and the auditee has a relationship, the audit performed might be
resulted to bias due to personal relationship of both parties.

2.
 Existence or Occurrence – all transaction and events really exist and have
occurred and pertain to entity.
 Completeness – all transactions and events that should have been recorded
have been recorded.
 Rights and Obligation – the entity holds or controls the rights to assets and
liabilities are the obligation of the entity.
 Valuation or Allocation – assets, liabilities and equity are included in the financial
statements at right amounts and any valuation or allocation adjustment are
appropriately recorded.
 Presentation and Disclosure - all appropriate information and disclosures are
included in entity’s financial statements and all the information presented in the
financial statements is fair and easy to understand .

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