The Auditorium - Your Guide to the Best Seats in the House

QUESTION [a] 

The auditor should take a significant step in considering planning materiality. In a case where the planning materiality is less than the financial statement account, then that account is considered significant. In cases where there is the existence of material weaknesses, then the account cannot be significant. 

QUESTION B. 

Qualitative factors that might cause an account that is otherwise relatively small quantitatively to be considered significant are as follows: 

- The complexity of the account as well as its size 

-The number of transactions that have taken place and been recorded 

-The nature of the particular account 

-The transparency of the amount of losses the account has incurred 

- Presence of related monetary exchanges in the record 

QUESTION [c] 

For an account not to be considered significant, they will depend on the level on which fraud and errors can be detected, accounts whose volume of activity is minimal and those that are not complex in nature. 

QUESTION [3] 

Entity level controls have a significant effect on other control components as accurate financial statements are produced. The entity level controls influences how the auditor evaluates other controls. Auditors are able to evaluate the design of internal control to detect errors in financial statements. Examples of entity level controls include conservative attitude in managing a business, appropriate assignment of authority and responsibility, policies that are meant to train, hire and prevent fraud. 

QUESTION Part B. 

According to AS5, a control deficiency is the point at which the operation denies the workers the order to play out their allocated capacities to counteract misquotes on an opportune premise. A significant deficiency is a mix of inadequacies in inner control over financial related reporting that affects the company’s ability to initiate, process or record a firm's financial data. A material weakness is an inadequacy in inner control where a sensible probability that a material misquote of the organization's yearly or between time monetary explanations won't be counteracted or recognized on an opportune premise. 

The auditor should have the significant deficiency and material weakness included in the audit report to prevent the report from being misunderstood.