Management's attitude toward intense financial revealing and its emphasis on meeting forecasted profit desired goals most likely will significantly impact an entity's control environment when В


A. В The audit committee can be active in overseeing the entity's economic reporting procedures. Answer A is inappropriate. В A working audit panel tends to outburst management's extreme stance. В B. В External guidelines established by parties outside the enterprise affect the accounting methods. Answer N is inappropriate. В External policies often moderate this sort of management inclinations. В C. В Management is centered by one individual who is the shareholder. Answer C is proper because these kinds of noted factors tend to have an especially significant impact on the control environment when management is definitely dominated simply by one or a few individuals. В This sort of a circumstance allows supervision to properly implement extreme financial credit reporting and emphasize meeting revenue goals. В D. В Internal auditors have immediate access to the plank of directors and organization management. Answer D is incorrect. В Internal auditors tend to mitigate management's aggressive attitude. close

Control environment. В The control environment factors set the tone of an firm, influencing the control mind of their people. В The seven control environment factors, which you might remember using the mnemonic IC HAMBO, are В

I| -| Integrity and moral values

C| -| Determination to proficiency

H| -| Human resource plans and methods

A| -| Assignment of authority and responsibility

M| -| Management's philosophy and operating style

B| -| Board of directors or audit panel participation| O| -| Organizational structure


What situation would worsen the position of the control environment? close

Answer C is correct since these observed factors generally have an especially significant influence around the control environment when management is focused by much more a few individuals. В Such a circumstance enables management to effectively apply aggressive economical reporting and emphasize conference profit goal Which from the following is definitely ordinarily deemed a factor indicative of increased financial revealing risk for the auditor is considering a client's risk assessment plans? В

A. В Commissioned revenue personnel.

Response A is incorrect. В Sales personnel are often remunerated on a percentage basis which is certainly not considered a factor ordinarily a sign of increased financial reporting risk. В B. В A corporate code of conduct.

Answer B is usually incorrect. В A corporate code of perform may be produced to act as guidelines when conducting business and this can be not regarded a factor in most cases indicative of increased financial reporting risk. В C. В Rapid growth of the business.

Answer C is correct. В Rapid growth of the organization is regarded as a risk factor when considering a client's risk analysis policies. В D. В Materiality standards for deciding whether to capitalize acquisitions of fixed assets. Answer D is incorrect. В Materiality specifications for identifying whether to capitalize purchases of fixed assets pertains to auditor's view and is not ordinarily regarded a factor a sign of increased financial confirming risk. close

Risk evaluation. В Pertaining to financial reporting purposes a great entity's risk assessment can be its identity, analysis, and management of risks relevant to the planning of financial statements following GAAP (or a few other comprehensive basis). В Listed below are considered risks that may affect an entity's ability to properly record, process, summarize and report economical data: В

(1)В Changes in the operating environment (e. g., increased competition) (2)В New personnel

(3)В New details systems

(4)В Rapid development

(5)В New technology

(6)В New lines, goods, or activities

(7)В Corporate restructuring

(8)В Foreign operations

(9)В Accounting pronouncements


Consider hazards that may impact an entity's...


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