You are concerned that your audit client has misclassified operating expenses as asset acquisitions, similar to the WorldCom fraud. What population will you use to select a sample to detect the potential misclassifications?

Question

BlackTom AI · Accepted Answer

When approaching a misclassification concern like WorldCom-style activity, the first step is to identify where the potentially misclassified items would reside in the financial statements.
Option 1: Recorded accounts payable. This population would capture liabilities and obligations, not the classification of expenses versus asset acquisitions. It would not directly reveal misstatements where operating expenses were incorrectly recorded as assets, so this choice is unlikely to detect the targeted misclassification.
Option 2: Recorded operating expenses. While this set includes the expenses that could be mislabeled, the focus of the misclassification in question is about items being recorded as assets instead of expenses. Sampling only from expenses would miss the counterpart misclassification into assets and therefore is not the most effective population for detecting the specific issue.
Option 3: Recorded asset acquisitions. This is the population that directly reflects items capitalized as assets. If operating expenses were improperly capitalized, they would appear here as asset acquisitions. Auditors would examine these asset records to determine whether they should have been expensed instead, making this the most direct and efficient population to detect the misclassification in question.
Option 4: Recorded long-term liabilities. This category concerns the funding or recognition of long-term obligations, not the expense-to-asset classification issue at hand. It would not target the misclassification of operating expenses as asset acquisitions, so it’s not a relevant population for this particular risk.

You are concerned that your audit client has misclassified operating expenses as asset acquisitions, similar to the WorldCom fraud. What population will you use to select a sample to detect the potential misclassifications?单项选择题

类似问题

You are planning a substantive test for purchase transactions to determine if all purchase invoices from suppliers represent items that were actually received by the Receiving Department. What is the appropriate population to select your sample for this test?

You are planning a substantive test for purchase transactions to determine if all inventory items received are recorded on the books. What is the appropriate population to select your sample to begin this test?

You are planning a substantive test of details to determine if all recorded sales revenue transactions are supported by a sales contract with the customer and a shipping document. What is the appropriate population to select your sample for this test?

The auditor uses monetary-unit sampling (MUS) to conduct substantive tests for an account. The desired confidence level in selecting the sample is 95%, the upper misstatement limit (UML) is $11,200, and the auditor’s tolerable misstatement is $14,000. Which of the following is a true statement?

As a result of tests of controls, an auditor incorrectly assessed control risk as high and inappropriately followed the substantive strategy for the financial statement audit. This assessment occurred because

One way to test all items in a population of occurrences for a particular control activity is to use testing, which is now possible due to the emergence of ADA.

ADA has a major impact on transaction level control testing by enabling the auditor to more easily Blank ______.

Question at position 15 As you need to be more confident in your sample, the sample size should:Stays the same.Increase or decrease based on the judgement of the internal audit function.Decrease. Increase.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单