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Chat_6_Solutions_(CH6) - 6-41 SOLUTION Valley Finance...

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6-41 SOLUTION: Valley Finance Company (a) The CPAs should determine the scope of the audit work by developing an audit program which considers the risks of material misstatement of the financial statements and controls in effect. The CPAs must extend the scope of the audit in areas of high risk or if essential controls are missing. Assessment of internal controls will include consideration of the operations at the loan offices as well as controls exercised by Mr. Norris and the frequency and effectiveness of supervisory and internal audit visits to the loan offices. The CPA's audit program should concentrate on weak spots which are evident from the consideration of internal control. That is, where the risk of material misstatement of an account is higher. The auditors will perform an assessment of fraud risks. If the CPAs identify fraud risks, the auditors will decide on an appropriate response, which may be an overall response or a change in the nature, timing and extent of audit procedures. In all
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