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Comptronix Corporation-Case study on identifying Inherent and Control Risk factors (Using the facts of the case and the relevant AUDITING standards, answer each of the questions) - Assignment Example

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It could be material, individually or combined with misstatements in other classes or balances. This occurs mostly due to the absence of proper internal controls to check such…
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Comptronix Corporation-Case study on identifying Inherent and Control Risk factors (Using the facts of the case and the relevant AUDITING standards, answer each of the questions)
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Download file to see previous pages Taking into account all the relevant factors, the auditor has to apply his professional knowledge and skills in taking appropriate decisions. “IR = Inherent risk (the risk that an assertion is susceptible to a material misstatement, assuming there are no related controls)” (Statements on Auditing Standards (SASs): Risk Assessment Standards par. 3).
Examples of financial records that have low Internal Risk include fixed assets or traded securities as opposed to accounts with high Internal Risk. For instance, those for which estimates have to be used and computations have to be conducted.
An audit comprising of a physical examination of Comptronixs equipment might have revealed that recognized assets do not exist. Considering the age of certain equipment, there is a need to take into account their depreciation. Thus, the actual value of the some equipment may not correspond to their book value. “Fictitious transactions frauds involve important accounts or just assets or revenues in general” (Ketz 407).
Besides auditing in a way that would have exposed the absence of certain purchases of equipment, the assessor could have also carried out an examination of check accounts and bank records to see where and by whom the vouchers were cashed. This would have revealed that the checks were not cashed in by an outside party. Thus, the company would have been in a clear position to establish the involvement of someone within the organization in the said manipulation.
In the same manner as in the case of fictitious accounts for equipment, the assessor could have checked the inventory to confirm the decrease in inventory of goods for sale with the actual sales to the consumers. “The auditor’s objective in examining accounts receivable is to form an opinion regarding management’s representation that an account receivable is presented fairly in conformity with ...Download file to see next pagesRead More
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