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A the industry and the business and regulatory

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a. The industry and the business and regulatory environments in which the client operates.b. The relationship between management, the board of directors, and external stakeholders.c. The degree to which the auditor intends to use internal audit personnel to perform substantive tests.d. The degree to which information technology is used in the accounting function.d. The degree to which information technology is used in the accounting function.Choice "d" is correct. The more complex the IT system, the more extensive the documentation (such as flowcharts,narratives, questionnaires, decision tables, etc.). The less complex the IT system, more limited documentation, such as amemorandum, may be sufficient.Choice "b" is incorrect. The relationship between management, the board of directors, and external stakeholders would bepart of the auditor's general understanding of the entity and its environment and would not affect the extent of internalcontrol documentation.Green, CPA, is auditing the financial statements of Ajax Co. Ajax uses the DP Service Center to process its payroll. DP's
financial statements are audited by Blue, CPA, who recently issued a report on DP's policies and procedures regarding theprocessing of other entity's transactions. In considering whether Blue's report is satisfactory for Green's purposes, Greenshould:
Choice "a" is incorrect. The user auditor (Green, CPA) has access to the report issued by the service auditor (Blue, CPA), butwould not have access to the audit programs followed by the service auditor.An auditor determines that there is a high level of control risk surrounding the revenue cycle. Which situation is most likelyto have given rise to this assessment?
d. The sales manager does not enforce the client's stated policies regarding authorization and approval of salestransactions.

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Term
Fall
Professor
OLIVEROS
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