MHR 623 Lecture Notes - Lecture 8: Aids, Mental Chronometry, Nortel
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A424
Homework #3
Due Tuesday, February 28
Worth 100 Points
Note: Students are expected to work independently (i.e., on your own) on all homework assignments. Please type and post to Canvas.
Part I. Risk Assessments
| 1. For each illustration, select the component of audit risk that is most directly illustrated. The components of audit risk may be used once, more than once, or not at all. (10 points, 1 point each). |
| Components: Inherent Risk (IR), Control risk (CR), or Detection Risk (DR) |
a. A client fails to discover employee fraud on a timely basis because bank accounts are not reconciled monthly.
b. Cash is more susceptible to theft than an inventory of coal.
c. Confirmation of receivables by an auditor fails to detect a material misstatement.
d. Disbursements have occurred without proper approval.
e. There is inadequate segregation of duties.
f. A necessary substantive audit procedure is omitted.
g. Notes receivable are susceptible to material misstatement, assuming there are no related internal controls.
h. Technological developments make a major product obsolete.
i. The client is very close to violating debt covenants.
j. XYZ Company, a client, lacks sufficient working capital to continue operations.
2. Read Case 1.6, Nextcard, Inc. from our Casebook. Pretend you are the auditor for Nexcard, Inc. in the planning phase of the audit for FY 2000 and perform the following risk assessment procedures. That is, just focus on the information in the case prior to the discovery of the fraud (pages 83-86). (50 points total)
a. Perform a risk assessment as part of your audit plan for fiscal year 2000. Set or assess each component/factor of the audit risk model. Describe in detail how you set or assessed each factor (i.e., include specific risk factors from the case and explain how they influenced your assessment). (25 points)
b. Perform a fraud risk assessment for the risk of material misstatement due to fraudulent financial reporting. That is, identify and briefly describe specific fraud risk factors (i.e., more than 1) for each of the three components of the fraud risk triangle, specific to fraudulent financial reporting. (15 points)
c. Identify and describe one significant pervasive risk present during the Nextcard audit. In doing so, explain how the pervasive risk affects the risk of material misstatement. Then, describe how the auditor could respond to that pervasive risk (how could they change the audit plan to address that risk). (5 points)
d. Identify and describe one significant specific risk present during the Nextcard audit. In doing so, explain how the specific risk affects the risk of material misstatement. Then, describe how the auditor could respond to that specific risk (how could they change the audit plan to address that risk). (5 points)
Part II. Evidence and Management Assertions
1. For each of the following specific audit procedures, indicate the type of audit procedure it represents: (1) inspection of records or documents, (2) inspection of tangible assets, (3) observation, (4) inquiry, (5) confirmation, (6) recalculation, (7) reperformance, (8) analytical procedures, and (9) scanning. (10 points, 1 point each)
a. sending a written request to the entityâs customers requesting that they report the amount owed to the entity
b. examining large sales invoices for a period of two days before and after year-end to determine if sales are recorded in the proper period.
c. agreeing the total of the accounts receivable subsidiary ledger to the accounts receivable general ledger account.
d. discussing the adequacy of the allowance for doubtful accounts with the credit manager.
e. comparing the current-year gross profit percentage with the gross profit percentage for the last four years.
f. examining a new plastic extrusion machine to ensure that this major acquisition was received.
g. watching the entityâs warehouse personnel count the raw materials inventory.
h. performing test counts of the warehouse personnelâs count of the raw material.
i. obtaining a letter from the entityâs attorney indicating that there were no lawsuits in progress against the entity.
j. tracing the prices used by the entityâs billing program for pricing sales invoices to the entityâs approved price list.
2. For each of the audit procedures listed above in Part II. 1. (a-j), identify the category (assertions about classes of transactions and events, or assertions about account balances) and identify the primary management assertion being tested. (30 points, 3 points each)
Chose the correct answers on one through 15(plese help)
1.A research group hypothesizes that successful infection by HIVdepends upon the expression of FSH3, a human gene. They overexpressthis gene in T cells (Which HIV normally infects) so that FSH3protein levels are very high in these cells. In other T-cells, theymutate FSH3 so that none of its encoded protein is made. They thenmeasure HIV infection rate in the control, overexpression, andmutant T cells. The three cultures are otherwise grown in the sameway.
What is the independent variable(s) in this experiment? (Selectall correct answers)
FSH3 protein levels | ||
The medium in which cells are grown | ||
The temperature at which cells are grown | ||
HIV resistance of cells |
Question 2
Which arises from an error in a measurement or observation?
Technical variability | ||
Biological variability | ||
Standard error | ||
Standard deviation |
Question 3
Use the following description of an experiment to answer thenext question.
A research group hypothesizes that successful infection by HIVdepends upon the expression of FSH3, a human gene. They overexpressthis gene in T cells (Which HIV normally infects) so that FSH3protein levels are very high in these cells. In other T-cells, theymutate FSH3 so that none of its encoded protein is made. They thenmeasure HIV infection rate in the control, overexpression, andmutant T cells. The three cultures are otherwise grown in the sameway.
What is the control group(s) in this experiment? (Select allcorrect answers)
The unaltered T cells | ||
The medium in which cells are grown | ||
The T cells in which FSH3 is mutated | ||
The T cells overexpressing FSH3 |
Question 4
How many of the following statements are true?
I. All papers have an abstract, methods, results, and discussionsection
II. The methods always follows the introduction
0 | ||
2 | ||
1 |
Question 5
If scientific convention states that when a P value of less than0.05 is considered significant (in other words, the two groupsbeing measured are actually different), this means that: (Selectall correct answers)
If you were to repeat the experiment 100 times, there would notbe a significant difference between the groups in 5 of theexperiments | ||
95% of all conclusions that state two groups are not differentbased on a 0.5% p-value threshold are false negatives | ||
The groups are actually not different from each other 95% of thetime | ||
5% of all conclusions that state two groups are different basedon a 0.5% p-value threshold are false positives |
What information is typically found in the introduction sectionof a paper? (Select all that apply)
The dependent and independent variables within the study | ||
Which areas of the field are not well understood and whatquestion the study addresses | ||
How the main question of the paper is related to other researchin the field. | ||
How previous work forms the basis for the current study | ||
The purpose of the study | ||
Details of the approaches used | ||
A summary of relevant related studies |
Question 7
How can you judge for yourself whether the conclusions reachedin a paper are valid? (Select all that apply)
Read papers of other authors studying the same question or areaof inquiry | ||
Determine if each hypothesis is supported by different types ofevidence/approaches. | ||
Consider closely whether the data actually both addresses andsupports the authorâs hypothesis. | ||
Examine the amount of data in the paper, and how long the paperis. | ||
Whether the authors find a mechanism, or exactly how on variableaffects another. | ||
Interpret the data for yourself without looking the discussion,then compare your interpretations to that of the authorâs. |
Question 8
Where can you usually find the institutional affiliations (wherethey work) of the authors?
Within the discussion | ||
In the acknowledgements section | ||
Below the authors list | ||
This is not usually included in papers |
Question 9
Other than publishing primary research articles, what is themain way scientists disseminate their results?
Lab meetings | ||
Personal correspondence | ||
Conference seminars | ||
Public lectures |
Question 10
Use the following description of an experiment to answer thenext question.
A research group hypothesizes that successful infection by HIVdepends upon the expression of FSH3, a human gene. They overexpressthis gene in T cells (Which HIV normally infects) so that FSH3protein levels are very high in these cells. In other T-cells, theymutate FSH3 so that none of its encoded protein is made. They thenmeasure HIV infection rate in the control, overexpression, andmutant T cells. The three cultures are otherwise grown in the sameway.
What is the experimental group(s) in this experiment? (Selectall correct answers)
Each group is its own control | ||
The T cells overexpressing FSH3 | ||
The T cells in which FSH3 is mutated | ||
The unaltered T cells |
