The 21 Irrefutable Laws of Leardeship Essay Example | Topics and Well Written Essays - 250 words

The 21 Irrefutable Laws of Leardeship - Essay Example This has made me to spend my time studying and reading motivational books that has really expanded my horizon and changed my perspective about life. The Law of Process has been enacted in my life as I have learnt that life is a transformational phase as I have developed over time. Just like the world is not stagnant, my life has evolved over time and now I believe in the Law of Process. The first law, which is the Law of the Lid is the one that I have found out that I am relatively weak in. The Law of the Lid as postulated by John Maxwell states that, one’s leadership ability is the lid that decides how effective one would be in the position of leadership (Maxwell). I have never been a leader before and this makes me feel that I don’t have any leadership quality. The Law of the Lid also postulates that, talented people would make effective leaders and I feel that I am not talented enough for the position of leadership. This is actually a feeling and I would have to work on this weakness in order to increase my effectiveness in this regard. I would believe more in myself and I would have the I CAN attitude. I believe by doing this, I would have worked on my weakness and increase my level of effectiveness as a

Control risk Essay Example for Free

Control risk Essay The auditor obtains an understanding of the design and implementation of internal Control to make a preliminary assessment of control risk as part of the auditor’s overall Assessment of the risk of material misstatements. The auditor uses this preliminary assessment of control risk to plan the audit for each material class of transactions. However, in some instances the auditor may learn that the control deficiencies are significant such that the client’s financial statements may not be auditable. So, before making a preliminary assessment of control risk for each material class of transactions, the auditor must first decide whether the entity is auditable. Two primary factors determine auditability: the integrity of management and the ade quacy of accounting records. If management lacks integrity, most auditors will not accept the engagement. The accounting records are an important source of audit evidence for most audit objectives. If the accounting records are deficient, necessary audit evidence may not be available. For example, if the client has not kept duplicate sales invoices and vendors’ invoices, it is usually impractical to do an audit. In complex IT environments, much of the transaction information is available only in electronic form without generating a visible audit trail of documents and records. In that case, the company is usually still auditable; however, auditors must assess whether they have the necessary skills to gather evidence that is in electronic form and can assign personnel with adequate IT training and experience. After obtaining an understanding of internal control, the auditor makes a preliminary assessment of control risk as part of the auditor’s overall assessment of the risk of material misstatement. This assessment is a measure of the auditor’s expectation that internal controls will prevent material misstatements from occurring or detect and correct them if they have occurred. The starting point for most auditors is the assessment of entity-level controls. By nature, entity-level controls, such as many of the elements contained in the control environment, risk assessment, and monitoring components, have an overarching impact on most major types of transactions in each transaction cycle. For example, an ineffective board of directors or management’s failure to have any process to identify, assess, or manage key risks, has the potential to undermine controls for most of the transaction-related audit objectives. Thus,  auditors generally assess entity-level controls before assessing transaction specific controls. Once auditors determine that entity-level controls are designed and placed in operation, they next make a preliminary assessment for each transaction-related audit objective for each major type of transaction in each transaction cycle. For example, in the sales and collection cycle, the types of transactions usually involve sales, sales returns and allowances, cash receipts, and the provision for and write-off of uncollectible accounts. The auditor also makes the preliminary assessment for controls affecting audit objectives for balance sheet accounts and presentations Many auditors use a control risk matrix to assist in the control risk assessment process at the transaction level. The purpose is to provide a convenient way to organize assessing control risk for each audit objective. the control risk matrix for transaction-related audit objectives, auditors use a similar control risk matrix format to assess control risk for balance-related and presentation and disclosure-related audit objectives. Identify Audit Objectives The first step in the assessment is to identify the audit objectives for classes of transactions, account balances, and presentation and dis closure to which the assessment applies. For example, this is done for classes of transactions by applying the specific transaction-related audit objectives introduced earlier, which were stated in general form, to each major type of transaction for the entity. For example, the auditor makes an assessment of the occurrence objective for sales and a separate assessment of the completeness objective. Identify Existing Controls Next, the auditor uses the information discussed in the previous section on obtaining and documenting an understanding of internal control to identify the controls that contribute to accomplishing transaction-related audit objectives. One way for the auditor to do this is to identify controls to satisfy each objective. For example, the auditor can use knowledge of the client’s system to identify controls that are likely to prevent errors or fraud in the occurrence transaction-related audit objective. The same thing can be done for all other objectives. It is also helpful for the auditor to use the five control activities (separation of duties, proper authorization,  Adequate documents and records, physical control over assets and records, and Independent checks on performance) as reminders of controls. For example: Is there adequate separation of duties and how is it achieved? Are transactions properly authorized? Are pre-numbered documents properly accounted for? Are key master files properly restricted from unauthorized access? The auditor should identify and include only those controls that are expected to have the greatest effect on meeting the transaction-related audit objectives. These are often called key controls. The reason for including only key controls is that they will be sufficient to achieve the transaction-related audit objectives and also provide audit efficiency. Associate Controls with Related Audit Objectives Each control satisfies one or more related audit objectives. This can be seen for transaction-relatedaudit objectives. The body of the matrix is used to show how each control contributes To the accomplishment of one or more transaction-related audit objectives. In this , a C was entered in each cell where a control partially or fully satisfied an bjective. A similar control risk matrix would be completed for balance-related and presentation and disclosure-related audit objectives. For example, the mailing of statements to customers satisfies three objectives in the audit of Hillsburg Hardware, which is indicated by the placement of each C on the row . Identify and Evaluate Control Deficiencies, Significant Deficiencies, and Material Weaknesses Auditors must evaluate whether key controls are absent in the design of internal control over financial reporting as a part of evaluating control risk and the likelihood of financial statement misstatements. Auditing standards define three levels of the absence of internal controls: 1. Control deficiency. A control deficiency exists if the design or operation of controls does not permit company personnel to prevent or detect mis-statements on a timely basis in the normal course of performing theirassigned functions. A design deficiency exists if a necessary control is missing or not properly designed. An operation deficiency exists if a well-designed control does not operate as designed or if the person performing the control is insufficiently qualified or authorized. 2. Significant deficiency. A significant deficiency exists if one or more control deficiencies exist that is less severe than a material weakness (defined below), but important enough to merit attention by those responsible for oversight of the company’s financial reporting. 3. Material weakness. A material weakness exists if a significant deficiency, by itself, or in combination with other significant deficiencies, results in a reason able possibility that internal control will not prevent or detect material financial statement misstatements on a timely basis. To determine if a significant internal control deficiency or deficiencies are a material weakness, they must be evaluated along two dimensions: likelihood and significance. If there is more than a reasonable possibility (likelihood) that a material misstatement (significance) could result from the significant deficiency or deficiencies, then it is considered a material weakness. A five-step approach can be used to identify deficiencies, significant deficiencies, and Material weaknesses. 1. Identify existing controls. Because deficiencies and material weaknesses are the absence of adequate controls, the auditor must first know which controls exist. The methods for identifying controls have already been discussed. 2. Identify the absence of key controls. Internal control questionnaires, flow charts, and walkthroughs are useful tools to identify where controls are lacking and the likelihood of misstatement is therefore increased. It is also useful to examine the control risk matrix, such as to look for objectives where there are no or only a few controls to prevent or detect misstatements. 3. Consider the possibility of compensating controls. A compensating control is one Elsewhere in the system that offsets the absence of a key control. A common example in a small business is the active involvement of the owner. When a compensating control exists, there is no longer a significant deficiency or material weakness. 4. Decide whether there is a significant deficiency or material weakness. The likelihood of misstatements and their materiality are used to evaluate if there are significant deficiencies or material weaknesses. 5. Determine potential misstatements that could result. This step is intended to identify specific misstatements that are likely to result because of the significant deficiency or material weakness. The importance of a significant deficiency  or material weakness is directly related to the likelihood and materiality of potential misstatements. Associate Significant Deficiencies and Material Weaknesses with Related Audit Objectives The same as for controls, each significant deficiency or material weakness can apply to one or more related audit objectives. In the case of Hillsburg, there are two significant deficiencies, and each applies to only one transaction-related objective. The significant deficiencies are shown in the body of the figure by a D in the appropriate objecti ve column. Assess Control Risk for Each Related Audit Objective After controls, significant deficiencies, and material weaknesses are identified and associated with transaction-related audit objectives, the auditor can assess control risk for transaction related audit objectives. This is the critical decision in the evaluation of internal control. The auditor uses all of the information discussed previously to make a subjective control risk assessment for each objective. There are different ways to express this assessment. Some auditors use a subjective expression such as high, moderate, or low. Others use numerical probabilities such as 1.0, 0.6, or 0.2. Again, the control risk matrix is a useful tool for making the assessment. This assessment is not the final one. Before making the final assessment at the end of the integrated audit, the auditor will test controls and perform substantive tests. These Procedures can either support the preliminary assessment or cause the auditor to make changes. In some cases, management can correct deficiencies and material weaknesses before the auditor does significant testing, which may permit a reduction in control risk. After a preliminary assessment of control risk is made for sales and cash receipts, the auditor can complete the three control risk rows of the evidence-planning worksheet . If tests of controls results do not support the preliminary assessment of control risk, the auditor must modify the worksheet later. Alternatively, the auditor can wait until tests of controls are done to complete the three control risk rows of the worksheet. As part of understanding internal control and assessing control risk, the auditor is required to communicate certain matters to those charged with governance. This Information and other recommendations about controls are also often communicated to management. Communications to Those  Charged With Governance The auditor must communicate significant deficiencies and material weaknesses in writing to those charged with governance as soon as the auditor becomes aware of their existence. The communication is usually addressed to the audit committee and to management. Timely communications may provide management an opportunity to address control deficiencies before management’s report on internal control must be issued. In some instances, deficiencies can be corrected sufficiently early such that both management and the auditor can conclude that controls are operating effectively as of the balance sheet date. Regardless, these communications must be made no later than 60 days following the audit report release. Management Letters In addition to these matters, auditors often identify less significant internal control-related issues, as well as opportunities for the client to make operational improvements. These should also be communicated to the client. The form of communication is often a separate letter for that purpose, called a management letter. Although management letters are not required by auditing standards, auditors generally prepare them as a value-added service of the audit. Test of controls We’ve examined how auditors link controls, significant deficiencies, and material Weaknesses in internal control to related audit objectives to assess control risk for each objective. Now we’ll address how auditors test those controls that are used to support a control risk assessment. For example, each key control that the auditor intends to rely on to support a control risk of medium or low must be supported by sufficient tests of controls. We will deal with tests of controls for both audits of internal control for financial reporting and audits of financial statements. Assessing control risk requires the auditor to consider both the design and operation of controls to evaluate whether they will likely be effective in meeting related audit objectives. During the understanding phase, the auditor will have already gathered some evidence in support of both the design of the controls and their implementation by using procedures to obtain an understanding . In most cases, the auditor will not have gathered  enough evidence to reduce assessed control risk to a sufficiently low level. The auditor must therefore obtain additional evidence about the operating effectiveness of controls throughout all, or at least most, of the period under audit. The procedures to test effectiveness of controls in support of a reduced assessed control risk are called tests of controls. If the results of tests of controls support the design and operation of controls as expected, the auditor uses the same assessed control risk as the preliminary assessment. If, however, the tests of controls indicate that the controls did not operate effectively, the assessed control risk must be reconsidered. For example, the tests may indicate that the application of a control was curtailed midway through the year or that the person applying it made frequent misstatements. In such situations, the auditor uses a higher assessed control risk, unless compensating controls for the same related audit objectives are identified and found to be effective. Of course, the auditor must also consider the impact of those controls that are not operating effectively on the auditor’s Report on internal control. Procedures for Tests of Controls The auditor is likely to use four types of procedures to support the operating effectiveness of internal controls. Management’s testing of internal control will likely include the same types of procedures. The four types of procedures are as follows: 1. Make inquiries of appropriate client personnel. Although inquiry is not a highly reliable source of evidence about the effective operation of controls, it is still appropriate. For example, to determine that unauthorized personnel are denied access to computer files, the auditor may make inquiries of the person who controls the computer library and of the person who controls online access security password assignments. 2. Examine documents, records, and reports. Many controls leave a clear trail of documentary evidence that can be used to test controls. Suppose, for example, that when a customer order is received, it is used to create a customer sales order, which is approved for credit. Then the customer order is attached to the sales order as authorization for further processing. The auditor can test the control by examining the documents to make sure that they are complete and properly matched and that required signatures or initials are present. 3. Observe control-related  activities. Some controls do not leave an evidence trail, which means that it is not possible to examine evidence that the control was executed at a later date. For example, separation of duties relies on specific persons performing specific tasks, and there is typically no documentation of the separate performance. For controls that leave no documentary evidence, the auditor generally observes them being applied at various points during the year. 4. Reperform client procedures. There are also control-related activities for which there are related documents and records, but their content is insufficient for the auditor’s purpose of assessing whether controls are operating effectively. For example, assume that prices on sales invoices are obtained from the master price list, but no indication of the control is documented on the sales invoices. In these cases, it is common for the auditor to reperform the control activity to see whether the proper results were obtained. For this example, the auditor can re perform the procedure by tracing the sales prices to the authorized price list in effect at the date of the transaction. If no misstatements are found, the auditor can conclude that the procedure . Extent of Procedures The extent to which tests of controls are applied depends on the preliminary assessed control risk. If the auditor wants a lower assessed control risk, more extensive tests of controls are applied, both in terms of the number of controls tested and the extent of the tests for each control. For example, if the auditor wants to use a low assessed control risk, a larger sample size for documentation, observation, and re performance procedures should be applied. The extent of testing also depends on the frequency of the operation of the controls, and whether it is manual or automated. Reliance on Evidence from the Prior Year’s Audit When auditors plan to use evidence about the operating effectiveness of internal control obtained in prior audits, auditing standards require tests of the controls’ effectiveness at least every third year. If auditors determine that a key control has been changed since it was last tested, they should test it in the current year. When there are a number of controls tested in prior audits that have not been changed, auditing standards  require auditors to test some of those controls each year to ensure there is a rotation of controls testing throughout the three year period. Testing of Controls Related to Significant Risks Significant risks are those risks that the auditor believes require special audit consideration. When the auditor’s risk assessment procedures identify significant risks, the auditor is required to test the operating effectiveness of controls that mitigate these risks in the current year audit, if the auditor plans to rely on those controls to support a control risk assessment below 100%. The greater the risk, the more audit evidence the auditor should obtain that controls are operating effectively. Testing Less Than the Entire Audit Period Recall that management’s report on internal control deals with the effectiveness of internal controls as of the end of the fiscal year. PCAOB Standard 5 requires the auditor to perform tests of controls that are adequate to determine whether controls are operating effectively at year-end. The timing of the auditor’s tests of controls will therefore depend on the nature of the controls and when the company uses them. For controls that are applied throughout the accounting period, it is usually practical to test them at an interim date. The auditor will then determine later if changes in controls occurred in the period not tested and decide the implication of any change. Controls dealing with financial statement preparation occur only quarterly or at year-end and must therefore also be tested at quarter and year-end. Relationship between Tests of Controls and Procedures to Obtaining Understanding There is a significant overlap between tests of controls and procedures to obtain an understanding. Both include inquiry, documentation, and observation. There are two primary differences in the application of these common procedures. 1. In obtaining an understanding of internal control, the procedures to obtain an understanding are applied to all controls identified during that phase. Tests of controls, on the other hand, are applied only when the assessed control risk has not been satisfied by the procedures to obtain an understanding. 2. Procedures to obtain an  understanding are performed only on one or a few transactions or, in the case of observations, at a single point in time. Tests of controls are performed on larger samples of transactions (perhaps 20 to 100), and often, observations are made at more than one point in time. For key controls, tests of controls other than re performance are essentially an Extension of procedures to obtain an understanding. Therefore, assuming the auditors plan to obtain a low assessed control risk from the beginning of the integrated audit, they will likely combine both types of procedures and perform them simultaneously. One option is to perform the audit procedures separately, where minimum procedures to obtain an understanding of design and operation are performed, followed by additional tests of controls. An alternative is to combine both columns and do them simultaneously. The same amount of evidence is accumulated in the second approach, but more efficiently. The determination of the appropriate sample size for tests of controls is an important audit decisions. Detection risk and the design of substantive tests We’ve focused on how auditors assess control risk for each related audit objective and support control risk assessments with tests of controls. The completion of these activities is sufficient for the audit of internal control over financial reporting, even though the report will not be finalized until the auditor completes the audit of financial statements. The auditor uses the control risk assessment and results of tests of controls to determine planned detection risk and related substantive tests for the audit of financial statements. The auditor does this by linking the control risk assessments to the balance related audit objectives for the accounts affected by the major transaction types and to the four presentations and disclosure audit objectives. The appropriate level of detection risk for each balance-related audit objective is then decided using the audit risk model. The relationship of transaction-related audit objectives to balance-related audit objectives and the selection and design of audit procedures for substantive tests of financial statement. Types of test In developing an overall audit plan, auditors use five types of tests to determine whether financial statements are fairly stated. Auditors use risk  assessment procedures to assess the risk of material misstatement, represented by the combination of inherent risk and control risk. The other four types of tests represent further audit procedures performed in response to the risks identified. Each audit procedure falls into one, and sometimes more than one, of these five categories. Figure 13-1 shows the relationship of the four types of further audit procedures to the audit risk model. As Figure 13-1 illustrates, tests of controls are performed to support a reduced assessment of control risk, while auditors use analytical procedures and tests of details of balances to satisfy planned detection risk. Substantive tests of transactions affect both control risk and planned detection risk, because they test the effectiveness of internal controls and the dollar amounts of transactions. Risk Assessment Procedures TThe second standard of fieldwork requires the auditor to obtain an understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement in the client’s financial statements. Risk assessment procedures are performed to assess the risk of material misstatement in the financial statements. The auditor performs tests of controls, substantive tests of transactions, analytical procedures, and tests of details of balances in response to the auditor’s assessment of the risk of material misstatements. The combination of these our types of further audit procedures provides the basis for the auditor’s opinion, as illustrated by Figure 13-1. A major part of the auditor’s risk assessment procedures are done to obtain an Understanding of internal control. Procedures to obtain an understanding of internal control were studied and focus on both the design and implementation of internal control and are used to assess control risk for each transaction-related audit objectively Tests of Controls EThe auditor’s understanding of internal control is used to assess control risk for each transaction-related audit objective. Examples are assessing the accuracy objective for sales transactions as low and the occurrence objective as moderate. When control policies and procedures are believed to be effectively designed, the auditor assesses control risk at a level that reflects the relative effectiveness of those controls. To obtain sufficient  appropriate evidence to support that assessment, the auditor performs tests of controls.S Tests of controls, either manual or automated, may include the following types of evidence. (Note that the first three procedures are the same as those used to obtain an understanding of internal control.) †¢ Make inquiries of appropriate client personnel †¢ Examine documents, records, and reports †¢ Observe control-related activities †¢ Reperform client procedures Auditors perform a system walkthrough as part of procedures to obtain an under standing to help them determine whether controls are in place. The walkthrough is normally applied to one or a few transactions and follows that transaction through the entire process. For example, the auditor may select one sales transaction for a system walk through of the credit approval process, then follow the credit approval process from initiation of the sales transaction through the granting of credit. Tests of controls are also used to determine whether these controls are effective and usually involve testing a sample of transactions. As a test of the operating effectiveness of the credit approval process, for example, the auditor might examine a sample of 50 sales transactions from throughout the year to determine whether credit was granted before the shipment of goods. Procedures to obtain an understanding of internal control generally do not provide sufficient appropriate evidence that a control is operating effectively. An exception may apply for automated controls because of their consistent performance. The auditor’s procedures to determine whether the automated control has been implemented may also serve as the test of that control, if the auditor determines there is minimal risk that the automated control has been changed since the understanding was obtained. Then, no additional tests of controls would be required. The amount of additional evidence required for tests of controls depends on two things: 1. The extent of evidence obtained in gaining the understanding of internal control 2. The planned reduction in control risk Figure 13-2 (p. 406) shows the role of tests of controls in the audit of the sales and collection cycle relative to other tests performed to provide  sufficient appropriate evidence for the auditor’s opinion. Note the un shaded circles with the words â€Å"Audited by TOC.† For simplicity, we make two assumptions: Only sales and cash receipts trans actions and three general ledger balances make up the sales and collection cycle and the beginning balances in cash and accounts receivable were audited in the previous year and are considered correct. If auditors verify that sales and cash receipts transactions are correctly recorded in the accounting records and posted to the general ledger, they can conclude that the ending balances in accounts receivable and sales are correct. (Cash disbursements transactions will OF have to be audited before the auditor can reach a conclusion about the ending balance in the cash account.) One way the auditor can verify recording of transactions is to perform tests of controls. If controls are in place over sales and cash receipts transactions, the auditor can perform tests of controls to determine whether the six transaction-related audit objectives are being met for that cycle. Substantive tests of transactions, which we will examine in the next section, also affect audit assurance for sales and cash receipts transactions. Substantive Tests of TransactionsSTS Substantive tests are procedures designed to test for dollar misstatements (often called monetary misstatements) that directly affect the correctness of financial statement balances. Auditors rely on three types of substantive tests: substantive tests of transactions, substantive analytical procedures, and tests of details of balances. Substantive tests of transactions are used to determine whether all six transactions related audit objectives have been satisfied for each class of transactions. Two of those objectives for sales transactions are recorded sales transactions exist (occurrence objective) and existing sales transactions are recorded (completeness objective for the six transaction-related audit objectives. When auditors are confident that all transactions were correctly recorded in the journals and correctly posted, considering all six transaction-related audit objectives, they can be confident that general ledger totals are correct. Figure 13-2 illustrates the role of substantive tests of transactions in the audit of the sales and collection cycle by lightly shaded circles with the words â€Å"Audited by STOT.† Observe that both tests of controls and substantive tests of transactions are performed for transactions in the cycle, not on the ending account  balances. The auditor verifies the recording and summarizing of sales and cash receipts transactions by performing substantive tests of transactions. Figure 13-2 shows one set of tests for sales and another for cash receipts. Analytical Procedures analytical procedures involve comparisons of recorded amounts to expectations developed by the auditor. Auditing standards require that they be done during planning and completing the audit. Although not required, analytical procedures may also be performed to audit an account balance. The two most important purposes of analytical procedures in the audit of account balances are to: 1. Indicate possible misstatements in the financial statements 2. Provide substantive evidence Analytical procedures done during planning typically differ from those done in the testing phase. Even if, for example, auditors calculate the gross margin during planning, they probably do it using interim data. Later, during the tests of the ending balances, they will recalculate the ratio using full-year data. If auditors believe that analytical procedures indicate a reasonable possibility of misstatement, they may perform additional analytical procedures or decide to modify tests of details of balances. When the auditor develops expectations using analytical procedures and concludes that the client’s ending balances in certain accounts appear reasonable, certain tests of details of balances may be eliminated or sample sizes reduced. Auditing standards state that analytical procedures are a type of substantive test (referred to as substantive analytical procedures), when they are performed to provide evidence about an account balance. The Extent to which auditors may be willing to rely on substantive analytical procedures in support of an account balance depends on several factors, including the precision of the expectation developed by the auditor, materiality, and the risk of material misstatement. Figure 13-2 illustrates the role of substantive analytical procedures in the audit of the sales and collection cycle by the dark shaded circles with the words â€Å"Audited by AP.† Observe that the auditor performs substantive analytical procedures on sales and Cash receipts transactions, as well as on the ending balances of the accounts in the cycle. Tests of Details of Balances Tests of details of balances focus on the ending general ledger balances for both balance sheet and income statement accounts. The primary emphasis in most tests of details of balances is on the balance sheet. Examples include confirmation of customer balances for accounts receivable, physical examination of inventory, and examination of vendors’ statements for accounts payable. Tests of ending balances are essential because the evidence is usually obtained from a source independent of the client, which is considered highly reliable. Much like for transactions, the auditor’s tests of details of balances must satisfy all balance-related audit objectives for each significant balance sheet account. Figure 13-2 illustrates the role of tests of details of balances by the circles with half dark and half light shading and the words â€Å"Audited by TDB.† Auditors perform detailed tests of the ending balances for sales and accounts receivable, including procedures such as confirmation of account receivable balances and sales cutoff tests. The extent of these tests depends on the results of tests of controls, substantive tests of transactions, and substantive analytical procedures for these accounts. Tests of details of balances help establish the monetary correctness of the accounts they relate to and therefore are substantive tests. For example, confirmations test for monetary misstatements in accounts receivable and are therefore substantive tests. Similarly, counts of inventory and cash on hand are also substantive tests. OSelect the appropriate types of audit tests Typically, auditors use all five types of tests when performing an audit of the financial statements, but certain types may be emphasized, depending on the circumstances. Recall that risk assessment procedures are required in all audits to assess the risk of material misstatement while the other four types of tests are performed in response to the risks identified to provide the basis for the auditor’s opinion. Note also that only risk assessment procedures, especially procedures to obtain an understanding of controls, and tests of controls are performed in an audit of internal control over financial reporting. Several factors influence the auditor’s choice of the types of tests to select, including the availability of the eight types of evidence, the relative costs of each type of test, the effectiveness of  internal controls, and inherent risks. Only the first two are discussed further because the last two were discussed in earlier chapters. Availability of Types of Evidence for Further Audit Procedures OEach of the four types of further audit procedures involves only certain types of evidence (confirmation, documentation, and so forth. †¢ More types of evidence, six in total, are used for tests of details of balances than for any other type of test. †¢ Only tests of details of balances involve physical examination and confirmation. †¢ Inquiries of the client are made for every type of test. †¢ Documentation is used in every type of test except analytical procedures. †¢ Re performance is used in every type of test except analytical procedures. Auditors may re perform a control as part of a transaction walkthrough or to test a control that is not supported by sufficient documentary evidence. †¢ Recalculation is used to verify the mathematical accuracy of transactions when per forming substantive test of transactions and account balances when per forming tests of details of balances. Relative Costs When auditors must decide which type of test to select for obtaining sufficient appropriate evidence, the cost of the evidence is an important consideration. The types of tests are listed below in order of increasing cost: †¢ Analytical procedures †¢ Risk assessment procedures, including procedures to obtain an understanding of internal control †¢ Tests of controls †¢ Substantive tests of transactions †¢ Tests of details of balances Analytical procedures are the least costly because of the relative ease of making calculations and comparisons. Often, considerable information about potential misstatements can be obtained by simply comparing two or three numbers. Risk assessment procedures, including procedures to obtain an understanding of internal control, are not as costly as other audit tests because auditors can easily make inquiries and observations and perform planning analytical procedures. Also, examining such things as documents  summarizing the client’s business operations and processes and management and governance structure are relatively cheaper than other audit tests. Because tests of controls also involve inquiry, observation, and inspection, their relative costs are also low compared to substantive tests. However, tests of controls are more costly relative to the auditor’s risk assessment procedures due to a greater extent of testing required to obtain evidence that a control is operating effectively, especially when those tests of controls involve re performance. Often, auditors can perform a large number of tests of controls quickly using audit software. Such software can test controls in clients’ computerized accounting systems, such as in computerized accounts receivable systems that automatically authorize sales to existing customers by comparing the proposed sales amount and existing accounts receivable balance with the customer’s credit limit. Substantive tests of transactions cost more than tests of controls that do not include re performance because the former often require recalculations and tracings. In a computerized environment, however, the auditor can often perform substantive tests of transactions quickly for a large sample of transactions. Tests of details of balances almost always cost considerably more than any of the Other types of procedures because of the cost of procedures such as sending confirmations and counting inventories. Because of the high cost of tests of details of balances, auditors usually try to plan the audit to minimize their use. Naturally, the cost of each type of evidence varies in different situations. For example, the cost of an auditor’s test-counting inventory (a substantive test of the details of the inventory balance) often depends on the type and dollar value of the Inventory, its location, and the number of different items. Relationship between Tests of Controls and Substantive Tests To better understand tests of controls and substantive tests, let’s examine how they differ. An exception in a test of control only indicates the likelihood of misstatements affecting the dollar value of the financial statements, whereas an exception in a substantive test of transactions or a test of details of balances is a financial statement misstatement. Exceptions in tests of controls are called control test deviations. From the three levels of control deficiencies: deficiencies, significant deficiencies, and  material weaknesses. Auditors are most likely to believe material dollar misstatements exist in the financial statements when control test deviations are considered to be significant deficiencies or material weaknesses. Auditors should then perform substantive tests of transactions or tests of details of balances to determine whether material dollar misstatements have actually occurred. Assume that the client’s controls require an independent clerk to verify the quantity, price, and extension of each sales invoice, after which the clerk must initial the duplicate invoice to indicate performance. A test of control audit procedure is to inspect a sample of duplicate sales invoices for the initials of the person who verified the information. If a significant number of documents lack initials, the auditor should consider implications for the audit of internal control over financial reporting and follow up with substantive tests for the financial statement audit. This can be done by extending tests of duplicate sales invoices to include verifying prices, extensions, and footings (substantive tests of transactions) or by increasing the sample size for the confirmation of accounts receivable (substantive test of details of balances). Even though the control is not operating effectively, the invoices may still be correct, especially if the person originally preparing On the other hand, if no documents or only a few of them are missing initials, the control will be considered effective and the auditor can therefore reduce substantive tests of transactions and tests of details of balances. However, some re performance and recalculation substantive tests are still necessary to provide the auditor assurance that the clerk did not initial documents without actually performing the control procedure or performed it carelessly. Because of the need to complete some re performance and recalculation tests, many auditors perform them as a part of the original tests of controls. Others wait until they know the results of the tests of controls and then determine the total sample size needed. Relationship between Analytical Procedures and Substantive Tests Like tests of controls, analytical procedures only indicate the likelihood of misstatements affecting the dollar value of the financial statements. Unusual fluctuations in the relationships of an account to other accounts, or to nonfinancial information, may indicate an increased likelihood that material misstatements exist without necessarily providing direct evidence of a  material misstatement. When analytical procedures identify unusual fluctuations, auditors should perform substantive tests of transactions or tests of details of balances to determine whether dollar misstatements have actually occurred. If the auditor performs substantive analytical procedures and believes that the likelihood of material misstatement is low, other substantive tests can be reduced. For accounts with small balances and only minimal potential for material misstatements, such as many supplies and prepaid expense accounts, auditors often limit their tests to substantive analytical procedures if they conclude the accounts are reasonably stated. Trade-Off between Tests of Controls and Substantive Tests There is a trade-off between tests of controls and substantive tests. During planning, auditors decide whether to assess control risk below the maximum. When they do, they must then perform tests of controls to determine whether the assessed level of control risk is supported. (They must always perform test of controls in an audit of internal control over financial reporting.) If tests of controls support the control risk assessment, planned detection risk in the audit risk model is increased, and planned substantive tests can therefore be reduced. Figure 13-3 shows the relationship between substantive tests and control risk assessment (including tests of controls) at differing levels of internal control effectiveness Impact of information technology on audit testing Auditing standards provide guidance for auditors of entities that transmit process, maintain, or access significant information electronically. Examples of electronic evidence include records of electronic fund transfers and purchase orders transmitted through electronic data interchange (EDI). Evidence of the performance of automated controls, such as the computer’s comparison of proposed sales orders to customer credit limits, may also only be in electronic form. The standards recognize that when a significant amount of audit evidence exists in electronic form, it may not be practical or possible to reduce detection risk to an acceptable level by performing only substantive tests. For example, the potential for improper initiation or alteration of information may be greater if information is maintained only in electronic form. In these circumstances, the auditor should perform  tests of controls to gather evidence in support of an assessed level of control risk below maximum for the affected financial statement assertions. Although some substantive tests are still required, the auditor can significantly reduce substantive tests if the results of tests of controls support the effectiveness of controls. In the audit of a larger public company, computer-performed controls (these are called automated controls) must be tested if the auditor considers them to be key controls for reducing the likelihood of material misstatements in the financial statements. Because of the inherent consistency of IT processing, however, the auditor may be able to reduce the extent of testing of an automated control. For example, software based control is almost certain to function consistently unless the program is changed. Once auditors determine an automated control is functioning properly, they can focus subsequent tests on assessing whether any changes have occurred that will limit the effectiveness of the control. Such tests might include determining whether any changes have occurred to the program and whether these changes were properly authorized and tested prior to implementation. This approach leads to significant audit efficiencies when the auditor determines that automated controls tested in the prior year’s audit have not been changed and continue to be subject to effective general controls. To test automated controls or data, the auditor may need to use computer-assisted audit techniques or use reports produced by IT to test the operating effectiveness of IT general controls, such as program change controls and access controls. In many cases, testing of automated controls may be performed by IT audit specialists. When auditors test manual controls that rely on IT-generated reports, they must consider both the Effectiveness of management’s review and automated controls over the accuracy of Information in the report.

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The protagonist in this self titled autobiography Martin Luther King, Jr. is Martin Luther King Jr. himself. In this scene Mr. King was at a book signing in a Harlem department store. As he was autographing a copy of his book about the Montgomery bus boycott titled â€Å" Stride toward Freedom† he was approached by the antagonist of this scene; an obviously demented black woman later to be judged as legally insane, Mrs. Izola Ware Curry. On Saturday September 20, 1958 Mrs. Curry approached Mr. King and asked, â€Å"Are you Martin Luther King?† Mr. King replied â€Å"Yes†, and she commenced to stab him in the chest with a razor sharp letter opener.   Ã‚  Ã‚  Ã‚  Ã‚  Martin Luther King, Jr. was rushed to Harlem Hospital by ambulance where he would lay for four hours while he was being prepped for the removal of the keen-edged knife. Days after surgery Dr. Maynard, the chief of the surgeons, informed Mr. King that the razor tip of the letter opener was touching his aorta requiring them to open his chest to remove it. With this comment to follow, â€Å" If you had sneezed during all those hours of waiting your aorta would have been punctured and you would have drowned in your own blood.† said Dr. Maynard.   Ã‚  Ã‚  Ã‚  Ã‚  If this had actually been the one of Dr. King’s last days; it would have meant that the world would have been deprived of a ten year, non-violent campaign that did in fact change society for the better. A little less than a year after his near fatal stabbing he and his family would embark upon a journey to India accompanied by Dr. D.L. Reddick. There he meet Ghandi himself giving him newfangled prospective on non-violent campaigns.   Ã‚  Ã‚  Ã‚  Ã‚  On a Humid Saturday Afternoon on September 20, 1958, Dr. King sat in a Harlem Department store signing copies of his book on the Montgomery bus boycott entitled â€Å"Stride Toward Freedom†. Amidst all the smiles and support of the crowd derived an obviously deranged woman. She approached Dr. King and inquired,†Are you Martin Luther King?† As Dr. King Replied, †Yesâ€Å" She stabbed him in the chest with a letter opener. Dr. King was rushed to the Harlem hospital by ambulance where he was immediately prepped and admitted to the surgery ward. After hours on the operating table the head surgeon Dr. Maynard, had the saturnine duty of telling the King family that the totality of effort shown by he an his team were only able to slow Dr.

Allergies: Immune System and Genetically Modified Organism

Adrian V. Perse Human Biology Dr. Lawrence C. Cwik * 19 November 2012 Allergies * We live in a world were technology is growing every day. We have new medical technology and are able to save more lives. With benefits come risks we have all this technology and we cant seem to stop genetically engineered foods from causing allergies. Ever wonder why people have allergic reactions to specific things? A lot of people don’t think about the foods they consume could cause them to have an allergic reaction.In this essay I will be talking about how genetically engineered foods can cause allergies or other adverse health effects. * Allergies are very common in the United States. Allergies affect over fifty million Americans and is the fifth leading disease in America. Different people also have different kinds of allergic reactions they could be more severe while some are mild. There are also different reaction times to allergies some take longer to develop while some only take a few se conds.If you have an allergic reaction that means you have something inside your body that could be harmful to you, this cause your immune system to have an over reaction to that hurtful/harmless substances. When this happens your body produces white blood cells to produce antibodies to eliminate the source of that threat. But what dose that have to do with GMOs? GMOs enter our body system directly through the foods that we eat. GMOs have a bigger effect on children then they do on adults because they are younger and their immune system isn’t as strong/resistant as an adults so they are more venerable.So what are GMOs you ask? GMOs stands for Genetically Modified Organism, which means a single celled organism that have been modified and put into foods to prevent pesticides. These are some of the GMOs that resulted from agricultural. One kind of GMO that has been approved out there is called Herbicide Tolerance, which is found in soybeans it builds tolerance to glyphosate allo wing crops that would normally have been destroyed to live. GMOs have a big impact not just on us but the environment to. Over eighty percent of GMOs grown are used to herbicide tolerance.GMOs pigs also affect animals; cows and chickens are some of the main few. GMOs remain in our system long after we stop eating GMOs. GM crops also produce toxins through milk or animals that were feed GMOs. Kids are also at risk by drinking a lot of milk. GMO’s can affects kids even before birth. Yea GMOs even affect pregnant mothers it harms the fetal development and future genes passed on. That’s a brief description of what GMOs are and what they do. * Now lets talk about plant breeding and how it affects us. Let me tell you what plant breeding is first.Scientists have a method to removing and adding new DNA to organisms. They remove a part of DNA from an organisms then they find the specific gene they want and remove that from the DNA. After that they bind they bind the DNA and ins erter it into a new organism. Scientists have been altering the genetics of plants trying to increase their value, they genetic alter crops by using unnatural breeding and use ultraviolet or gamma rays on these crops that we later consume. Genetically cross breeding decreases nutrition value then it normally would have been.Another disadvantages to plant breeding is antibiotic resistance. Plants are being inserted with antibiotics genes. When the plants receive the antibiotic and survives the antibiotic still remains inside the plant. When animals or humans consume this we could become immune to that antibiotic that we could of used later on being immune to a lot of antibiotic could prove harmful later in our generation. Increased toxicity is another disadvantage of plant breeding. Normally plants produce toxins but they are so mild that they do not have an affect on our health.By cross breeding plants this increases the toxicity level of plants and could prove to be harmful to our health that normally would have had been; before cross breeding. Those are some of the different affects of plant breeding. * After all you heard about your probably wondering why we still use GMOs. One thing scientists have been testing is to manipulate tree genes into absorbing CO2 to help reduce global warming. GMOs are needed to feed the growing population of the earth. We need more food cause were growing so fast we need to keep how much we produce higher then how much we consume.But who really needs the GMOs? Animals consume more GMOs then human do. More corn, soybeans, and other crops are feed to animals then humans. GMs are resistant to bacterial and viruses. GMs grow much faster then normal crops. GMs are resistant to harsh weather conditions such as colds making them able to grow in different environments. They can also add vitamins to the modified food, which could prove a good thing for third world countries that suffer from malnutrition. Another benefit to GMOs is that they last longer. They have a longer life expanse then they would of normally had. Now that you heard some of the advantages of GMOs let me tell you some of the disadvantages. Allergies are a big impact. In the past few years allergies has increased. This is cause by GMOs and cross breeding plants. Cross breeding plants mixes up the different genes in organisms combining different proteins that should have not been combined with that organism normally. These new proteins are produced from genetic engineering and our immune system hasn’t experienced this from of protein. This alerts the immune system to have an allergic reaction, which causes inflammation.This of course has a much more severe impact on children then it dose on adults and also has some long-term effects if you consume a lot of GMOs. GMOs don’t just affect humans they also hurt the environment. This could even affect babies before they are even born. We all know pregnant moms shouldn’t be eating sp ecific kinds of foods. If a protein from something she’s allergic to be mixed with another species and she consumes it could be harmful to herself but the baby as well. Changing different spices of plant could hurt the natural cycle of life.If they don’t think GMOs are such a bad thing why don’t they label it? The FDA refuses to put labels on food stating weather they have been genetically mortified or not. Americans have the right to know weather they are consuming genetically mortified food or not. People shouldn’t be eating foods that could prove harmful to them their children. Other countries around the world have labels on their food stating if they are GM or not. When they are cross-breading plants/fruit they could be transferring different viruses from one organism to another with out even realizing it.GMOs also decrease the genetic diversity. Another big problem with GMOs are toxic fiction of neighboring crops. Nature is a very complex being and e verything is linked together so altering the balance messes up nature’s cycle of life. There are a lot of advantages to using GMOs I’m not saying there aren’t. But that doesn’t change the fact that allergic reactions have increased substantially since the use of GMOs. A lot of countries already realized this and labeled their foods stating wither or not they contain GMOs. I think the United States should start labeling their foods.This isn’t going to stop the use of GMOs but it will reduce the allergic reaction rate in America. It’s a little scary to know that over seventy percent of the world’s population has been genetically modified. And how we don’t know what we’re consuming that we just consume. We don’t think about our health till the day we actually get sick and by then it’s to late. Around eighty six percent of the words GMOs are grown right here in the U. S. those are some of the ways I think genet ically engineered foods can cause allergies or other adverse health effects. *

Superstition in Huckleberry Finn

Superstition If you step on a crack, you will break your mamma back, keep cats away from babies because they suck the breath of the child, and cross my heart and hope to die, cut my throat if I tell a lie are examples of some superstitions that people believe in. According to Merriam-Webster dictionary, superstition is a belief or practice resulting from ignorance, fear of the unknown, trust in magic or chance, or a false conception of causation. In The Adventures of Huckleberry Finn, Jim and Huck use and believe in many superstitions. There are many examples from the book that show this in the characters. Most of the superstitions are ridiculous, but some actually make a little sense. In the book, The Adventures of Huckleberry Finn, by Mark Twain, one of the main themes he uses in this book is superstition and two main characters that have attitudes that are different and similar towards superstition is Huck and Jim. Huck at the beginning of the story wasn’t superstitious at all. He thought Jim was crazy for being superstition. Huck weakly believes in superstition but later in the story his views changes. Huck killed a rattlesnake and placed it on the foot of Jim blanket, Jim see the dead rattlesnake with his mater and told Huck that this was bad luck. Huck later says â€Å"I made up mmind I wouldn't ever take a-holt of a snake-skin again with my hands, now that I see what had come of it†(pg53); this mean that he do not really know all the superstitious things because he placed the dead rattlesnake at the foot of Jim’s blanket, just joking around, and he found out what happens as the effect of the joke. During this time Huck become a firm believer in superstition. Huck helps his friend Tom use superstition to help Jim escape by telling Jim’s keeper, Nat, who believes witches are haunting him, that the only cure is to bake a witch pie and give it to Jim. In the witch pie there were things that were going to help Jim escape. Next Jim views about superstition are different than Huck. Unlike Huck, he is a very superstitious man and used it for almost everything in life. He also does not joke around with superstition, unlike Huck. Jim uses superstition to fill the things he didn’t learn or understood in life. Jim uses superstition for a sign for all things that happen in nature. One example of this is, â€Å"Some young birds come along, flying a yard or two at a time and lighting. Jim said it was a sign that it was going to rain†(pg45). Jim looks at the birds and can tell that it is going to rain. Since there were no weather devices in the eighteen hundreds, signs like these were used to predict the weather. Jim view superstition by his faith by thinking the hairball is a magic spirit. Superstition kind of motivates him to escape to freedom because he found out that he was going to be sold for a high price because he believes if your chest is hairy you are worth a lot of money; which encourages him to escape his owner, Ms. Watson. Although Huck and Jim have different views on superstition, they also have views that are the same. They both do things that would stop the superstition from bringing bad luck. For example during the rattlesnake episode, Jim tells Huck to chop off the snake's head, then skin the body of the snake and put it around his wrist, so he would not be cursed. They become irrational when anything remotely superstitious happens to them. They also think when something bad happens to them it is the effect of the superstitious act that they did. In conclusion, in Mark Twain's novel, â€Å"The Adventures Huckleberry Finn†, he uses superstition to show many points. Mark Twain uses superstition to show contrast between an organized, Christian religion and believing in and superstitions and one's own beliefs. As Huckleberry Finn and Jim are hurled back and forth between these two different faiths, the reader gets a keen idea of the beliefs and lifestyles people followed living in this story. He uses it to serves foreshadow the plot at several key junctions. For example, spilling salt leads to Pa returning for Huck. Overall, superstition is used in â€Å"The Adventures Huckleberry Finn† as a way to share Mark Twain's own opinion on religion and refined living with his readers and help them to understand the good and bad of both ways of living.