Chapter 13 Overall Audit Plan and Audit Program
Review Questions
The The five five types types of test tests s audi audito tors rs use to deter determi mine ne whet whether her fina financi ncial al statements are fairly stated include the following:
13-1
Risk assessment procedures Tests of controls Substantive tests of transactions Analytical procedures Tests of details of balances
While risk assessment procedures (procedures to gain an understanding of the entity and its environment, including internal control help the financial statement auditor obtain information to make an initial assessment of control risk, tests of controls must be performed as support of an assessment of control risk that is below ma!imum" The purpose of tests of controls is to obtain evidence regarding the effectiveness of controls, which may allow the auditor to assess control risk below ma!imum" #f controls are found to be effective and functioning, the substantive evidence may be reduced" Substantive evidence is obtained to reduce detection risk" Substantive Substantive evidence includes includes evidence evidence from substantive substantive tests of transactions, analytical procedures, and tests of details of balances" $or audits of internal control over financial reporting, the auditor only performs the first two types types of audit tests: procedures to obtain an understanding of internal control and tests of controls" %ecause a public company auditor auditor must issue issue a report report on interna internall contro controll over over financ financial ial report reporting ing,, the e!tent of the audit auditor& or&s s test tests s of cont control rols s must must be suff suffic icie ient nt to issu issue e an opin opinio ion n abou aboutt the the operating effectiveness of those controls" That generally re'uires a significant amount of testing of controls over financial reporting" Risk assessment assessment procedures are performed to assess the risk of material material misstatement in the financial statements" Risk assessment procedures include proc proced edur ures es perf perfor orme med d to obta obtain in an unde unders rsta tand ndin ing g of the the enti entity ty and and its its environ environment ment,, includ including ing interna internall contro controls" ls" Auditors Auditors use the results results of the risk risk assessment procedures to design and perform perform further audit procedures" $urther audit procedures (not risk assessment procedures provide the auditor sufficient appropriate evidence, re'uired by the third AAS fieldwork standard"
13-2
)*+)
Tests of controls are audit procedures pr ocedures to test the operating effectiveness of control policies and procedures in support of a reduced assessed control risk" Tests of controls provide the primary basis for a public company auditor&s report on interna internall control controls s over over financ financial ial report reporting ing"" Specif Specific ic account accounts s affect affected ed by performing tests of controls for the ac'uisition and payment cycle include the following: cash, accounts payable, purchases, purchase returns and allowances, purch purchase ase disco discoun unts ts,, manu manufa fact ctur uring ing e!pen e!pense ses, s, sell selling ing e!pen e!pense ses, s, prepa prepaid id insurance, leasehold improvements, and various administrative e!penses"
13-3
Tests of controls are audit procedures pr ocedures to test the operating effectiveness of control policies and procedures in support of a reduced assessed control risk" !amples include: 13-4
)" The The e!ami e!amina nati tion on of ven vendo dorr invoi invoice ces s for ind indic icat atiion tha thatt they they have been clerically tested, compared to a receiving report and purchase order, and approved for payment" -" !am !amin inat atio ion n of emp emplo loy yee tim time e card cards s for for app appro rova vall of over overti time me hours worked" *" !am !amin inat atio ion n of of .ou .ourn rnal al entr entrie ies s for for prop proper er appr approv oval al"" /" !am !amin inat atio ion n of of app appro rova vals ls for for the the write rite+o +off ff of bad bad deb debts ts"" Substantive tests of transactions are audit procedures testing for monetary misstatement misstatements s to determine determine whether whether the si! transaction+relate transaction+related d audit ob.ectives ob.ectives have been satisfied for each class of transactions" !amples are: )" Reca Recalc lcul ulat atio ion n of amo amoun unts ts ('u ('uan anti tity ty tim times es uni unitt sell sellin ing g pric price e on selected sales invoices and tracing of amounts to the sales .ournal" -" !amination of vendor invoices in support of amounts recorded in the ac'uisitions .ournal for purchases of inventories" *" Reca Recalc lcul ulat atio ion n of gros gross s pay pay for for sel selec ecte ted d entr entrie ies s in the the pay payroll roll .ournal" /" Traci acing of of sele select cted ed cus custo tom mer cash cash rec recei eipt pts s to the the acco accoun unts ts receivable master file, agreeing customer names and amounts" 13-5 A test of control audit procedure to test that approved wage rates are used
to calculate employees0 earnings would be to e!amine rate authori1ation forms to determine the e!istence of authori1ed signatures" A substantive test of o f transactions audit procedure would be to compare compar e a sample of rates actually paid, as indicated in the earnings record, to authori1ed pay rates on rate authori1ation forms"
)*+-
The auditor resolves the problem by making assumptions about the results of the tests of controls and performing both the tests of controls and substantive tests of transactions on the basis of these assumptions" 2rdinarily the auditor assum assumes es an effe effect ctiv ive e syste system m of inte intern rnal al cont control rol with with few few or no e!cep e!cepti tion ons s planned" #f the results of the tests of controls are as good as or better than the assumptions that were originally made, the auditor can be satisfied with the substantive tests of transactions, unless the substantive tests of transactions themse themselve lves s indica indicate te the e!iste e!istence nce of missta misstatem tement ents" s" #f the tests tests of controls controls results were not as good as the auditor assumed in designing the original tests, e!panded substantive tests must be performed"
13-6
The primary purpose of testing sales and cash receipts transactions is to evaluate the internal controls so that the scope of the substantive tests of the account balances may be set" #f the auditor performs the tests of details of balances prior to testing internal controls, no benefit will be derived from the tests of cont contro rols ls"" The audi audito torr shou should ld atte attemp mptt to unde unders rsta tand nd the the enti entity ty and and its its environment, including internal controls, as early as practical through the analysis of the accounting system, tests of controls, and substantive tests of transactions"
13-
When the results of analytical procedures are different from the auditor0s e!pect e!pectati ations ons and thereby thereby indicate indicate that there there may be a missta misstatem tement ent in the balance in accounts receivable or sales, the auditor should e!tend the tests to deter determi mine ne why why the the rati ratios os are diff differe erent nt from from e!pec e!pecta tati tion ons" s" 3onf 3onfir irma mati tion on of accounts receivable and cutoff tests for sales are two procedures that can be used to do this" 2n the other hand, if the ratios are appro!imately what the auditor e!pects, the other tests can be reduced" This means that the auditor can sati satisf sfy y the the evid eviden ence ce re'u re'uir irem emen ents ts in diff differ eren entt way ways and and that that anal analyt ytic ical al procedures and confirmation are complementary when the results of the tests are both good" 13-!
Substantive tests of transactions are performed to verify the accuracy of a clie client nt0s 0s accou account ntin ing g syst system" em" This This is accom accompl plis ished hed by dete determ rmin inin ing g whet whether her individual transactions are correctly recorded and summari1ed in the .ournals, master master files, files, and general general ledger ledger"" Substa Substanti ntive ve tests tests of transa transacti ctions ons are also also concerne concerned d with with classes of transactions, such as payroll, ac'uisitions, or cash receipts" Tracing amounts from a file of vouchers to the ac'uisitions .ournal is an e!ample of a substantive test of transactions for the ac'uisition and payment cycle" cycle" Tests Tests of detail details s of balances balances verify verify the ending ending balance balance in an individual account (such as inventory, accounts receivable, or depreciation e!pense on the fina financ ncia iall stat statem emen ents ts"" An e!am e!ampl ple e of a test test of deta detailils s of bala balanc nces es for for the the ac'uisition and payment cycle is to physically e!amine a sample of the client0s fi!ed assets" 13-"
)*+*
13-1# )"
Control #1 -- Computer verification of the customer’s credit limit "
The presenc presence e of strong strong general general contro controls ls over over softw software are program programs s and mast master er file file chan changes ges can can sign signif ific icant antly ly reduc reduce e the the audi audito tor&s r&s test testin ing g of automated automated controls such as control 4)" 2nce it is determined determined that control control 4) is functioning properly, the auditor can focus subse'uent tests on asses assessi sing ng whet whethe herr any chan changes ges have have occur occurred red that that woul would d limi limitt the the effectiveness of the control" Such tests might include determining whether any changes have occurred to the program and whether these changes were properly authori1ed and tested prior to implementation" These are all tests of general controls over software programs and master file changes" Control Control #2 5 The accounts receivable clerk matches bills of lading, sales invoices, and customer orders before recording in the sales journal.
2.
This control is not an automated control, but is rather a manual control performed by an employee" eneral controls over software programs and master file changes would have little effect on the auditor&s testing of control 4-" #f the auditor identifies identifies control 4- as a key control control in the sales and collection cycle, he or she would most likely e!amine a sample of the underl underlyin ying g documen documents ts for the account accounts s receiva receivable ble clerk& clerk&s s initia initials ls and reperform the comparisons" 13.11
The audit of fi!ed asset additions normally involves the e!amination of invoices in support of the additions and possibly the physical e!amination of the additions" These procedures are normally performed on a test basis with a concentration on the more significant additions" #f the individual responsible for recording new ac'uisitions is known to have inade'uate training and limited e!perience in accounting, the sample si1e for the audit proc proced edur ures es shou should ld be e!pa e!pand nded ed to incl includ ude e a larg larger er samp sample le of the the additions for the year" #n addition, in'uiry as to what additions were made duri during ng the the year year may be made made by the the audi audito torr of plant plant manage managers, rs, the controller, or other operating personnel" The auditor should then search the financial records to determine that these additions were recorded as fi!ed assets" 3are 3are shou should ld also also be take taken n when when the the repa repair irs s and and main mainte tena nanc nce e e!pense e!pense account account is analy1 analy1ed ed since since lack lack of traini training ng may cause some depreciable assets to be e!pensed at the time of ac'uisition"
13-12 The following shows which types of evidence are applicable for the five
types of tests"
)*+/
$%P& O' &()*&+C&
$%P&, O' $&,$,
6hysical e!amination
Tests of details of balances
3onfirmation
Tests of details of balances
7ocumentation
All e!cept analytical procedures
2bservation
Risk Risk assess assessmen mentt procedu procedures res and tests tests of controls
#n'uiries of the client
All five types
Reperformance
Tests sts of cont contro rols ls,, subs substa tant ntiv ive e test tests s of transactions, and tests of details of balances
Analytical procedures
Analytical procedures
Recalculation
Substantive tests of transactions and tests of details of balances
ar e: 13-13 oing from most to least costly, the types of tests are:
13.14
Tests of details of balances Substantive tests of transactions Tests of controls Risk assessment procedures Analytical procedures
3 represents the auditor0s assessment of the effectiveness of internal control" 3* represents the idea that internal controls are ineffective and no assurance can be obtained from controls and all assurance must come from substantiv substantive e testing" This would would not represent represent the audit of a public company&s financial statements" Tests Tests of controls co ntrols at the 3) level would provide minimum control risk" This would re'uire more testing of the controls than would be re'uired at either 3- or 3*" Testing controls at the 3 ) level allows the auditor to obtain assurance from the controls, thereby allowing for a reduction in the
13-14 .ontinued/
amount of substantive substantive testing testing which must be performed performed to meet the level of acceptable audit assurance" 3) reflects the level of testing of controls necessary for the audit of internal controls over financial reporting re'uired by 63A2% Standard -" #t would be a good decision to obtain assurance from tests of cont contro rols ls at poin pointt 3) espe especi cial ally ly if the the cost cost of subs substa tant ntiv ive e test testin ing g is considerably greater than tests of controls" At point 3-, the auditor performs some tests of controls and is able to reduce control risk below ma!imum" 6oint 3 - would be appropriate appropriate if it is cost beneficial for the auditor to obtain assurance at a level between the two e!tremes mentioned above (3 ) and 3*"
)*+8
13-15 %y identifying the best mi! of tests the auditor can accumulate sufficient
appro appropri priat ate e evid eviden ence ce at mini minimu mum m cost cost"" The The audi audito torr can can there thereby by meet meet the the standards of the profession and still be cost effective and competitive" 13-16 The four+step approach to designing tests of controls and substantive
tests of transactions is as follows: )" Appl Apply y the the tran transa sact ctio ion+ n+re rela late ted d audi auditt ob.e ob.ect ctiv ives es to to the the clas class s of transactions being tested" -" #den #denti tify fy spe speci cifi fic c cont contro roll poli polici cies es and and pro proce cedu dure res s that that sho shoul uld d reduce control risk for each transaction+related audit ob.ective" *" 7eve 7evelo lop p appr approp opri riat ate e test tests s of of con contr trol ols s for for eac each h key key con contr trol ol"" /" 7esign appropriate substantive tests of transactions consider considering ing defici deficienci encies es in interna internall contro controll and e!pect e!pected ed results results from * above" 13-1 The approac approach h to design designing ing tests tests of contro controls ls and substan substantiv tive e tests tests of transactions ('igure 13-4 emphasi1es satisfying the transaction+related audit
ob.ectives developed in 3hapters 9 and )" Recall that these ob.ectives focus on the proper functioning of the accounting system" The methodology of designing tests of details of balances ( 'igure 13-6 emphasi1es satisfying the balance+related audit ob.ectives developed in 3hapter 9" The primary focus of these ob.ectives is on the fair presentation of account balances in the financial statements" 13-1! #t is desirable to design tests of details of balances before performing tests
of cont contro rols ls and and subst substan anti tive ve test tests s of trans transac acti tions ons to enab enable le the the audi audito torr to determine if the overall planned evidence is the most efficient and effective in the circumstances" #n order to do this, the auditor must make assumptions about the results of the tests of controls and substantive tests of transactions" 2rdinarily the auditor will assume no significant misstatements or control problems in tests of controls and substantive tests of transactions unless there is reason to believe otherwise" #f the auditor determines that the tests of controls and substantive tests of transactions results are different from those e!pected, the amount of testing of details of balances must be altered" 13-1" #f tolerable misstatement is low, and inherent risk and control risk are high,
planned planned tests of details of balances which the auditor must perform will be high" An increase in tolerable misstatement or a reduction of either inherent risk or control risk will lead to a reduction in the planned tests of details of balances" 13-2# The nine balance+related audit ob.ectives and related procedures are as follows:
)*+9
0&+&RA AA+C&R&A$&* R&A$&* A*)$ O&C$)(&
,P&C)')C O&C$)(&
A*)$ PROC&*R&
7etail tie+in
#nventory on the inventory summary agrees with the physical count, the e!tensions are correct, and the total is correctly added and agrees with the general ledger"
3heck e!tensions of price times 'uantity on a sample basis, foot the detailed inventory summary, and trace the balance to the general ledger and financial statements"
!istence
#nventory as stated in financial statements actually e!ists"
Trace inventory from final inventory summary to actual inventory and physically count selected items"
3ompleteness
!isting inventory items have been counted and included in the financial statements"
Select items from the physical inventory and trace to the client0s final summary to make sure that all items are included"
Accuracy
#nventory items included included in the financial statements are stated at the correct amounts"
6erform price tests of inventory by e!amining supporting vendors0 invoices for selected inventory items and reverify price times 'uantity"
3lassification
#nventory as included in the financial statements is properly classified"
3ompare the classification of inventory into raw materials, work in process, and finished goods by comparing the description on physical inventory count tags with the client0s final inventory listing"
3utoff
#nventory cutoff is properly recorded at the balance sheet date"
Trace selected receiving reports several days before and after the balance sheet date to determine whether inventory purchases are recorded in the proper period and related physical inventory counts are included or e!cluded from inventory"
)*+;
Reali1able ble va value
0&+&RA AA+C&R&A$&* A*)$ O&C$)(&
Rights and obligations
#nventory on the financial statements e!cludes unusable items"
,P&C)')C O&C$)(&
#nventory items in the financial statements are owned by the client"
#n'uire of factory employees and management regarding obsolescence of inventory, and e!amine storeroom for evidence of damaged or obsolete inventory"
A*)$ PROC&*R&
Review contracts with suppliers and customers for the possibility of the inclusion of consigned or other non+ owned inventory" inventory"
13-21 Auditors fre'uently consider it desirable to perform audit tests throughout
the year rather than waiting until year+end because of the 36A firm0s difficulty of scheduling personnel" 7ue to the uneven distribution of the year+end dates of their clients, there is a shortage of personnel during certain periods of the year and e!cess available time at other periods" The procedures that are performed at a date prior to year+end are often dependent upon ade'uate internal controls and when the client will have the information available" Additionally, public company auditors must begin their testing of controls earlier in the year to ensure they are able to test a sufficient sample of controls for operating effectiveness" Some controls may only be performed monthly or 'uarterly" Thus, the public company auditor must begin testing early in the year so that there is a sufficient number of months or 'uarters to test" 6rocedures that may be performed prior to the end of the year are: )" -" *" /" 8" 9"
es> (b (b 3onf 3onfir irma mati tion on of of acco accoun unts ts rec recei eiva vabl ble e bala balanc nces es>> (c 3onf 3onfir irma mati tion on and and rec reconc oncililia iati tion on of acco accoun unts ts payab payable le balances"
ultiple Choi.e Questions 'rom CPA &aminations
)*+?
13-22 a"
(-
b" (-
c"
(*
d" ()
13-23 a"
(-
b" (/
c"
()
d" (*
13-24 a"
(/
b" (*
)*+@
*is.ussion Questions and Pro7lems
13-25 a8
78
)"
T7 of %
Recalculation
-"
T7 of %
7ocumentation
*"
A6
Analytical procedures
/"
T of 3
7ocumentation
8"
ST of T
7ocumentation
9"
A6
Recalculation
;"
T7 of %
7ocumentation
?"
T of 3
#n'uiry and observation
@"
T7 of %
3onfirmation
)" T of 3
7ocumentation
))" T of 3
#n'uiry
)*+)
13-26
a8
) * + @
78
.8
d8
)"
Ac'u c'uisit sition and and 6ayment
Recalculation
Substantive
S T of T
-"
Ac'u c'uisit sition and and 6ayment
7ocumentation
Test of control or Substantive
*"
Ac'u c'uisit sition and and 6ayment
7ocumentation
/"
Sales and 3ollection
#n'uiry
8"
#nventory and Warehousing
9" ;"
e8
98
BA
S T of T
6osting and summari1ation 2ccurrence
Substantive
T 7 of %
BA
3utoff
Substantive
T 7 of %
BA
Reali1able value
Analytical procedure
Substantive
A6
BA
Reali1able value
3api 3apita tall Ac'ui c'uisi siti tion on and Repayment
3onfirmation
Substantive
T 7 of %
BA
!istence Accuracy
Ac'u c'uisit sition and and 6ayment
Recalculation
Substantive
T 7 of %
BA
)*+))
BA
7etail tie+in
13-2 PAP&R A*)$ $RA):
$&,$ O' CO+$RO
a"
Ces Ces
Account for numbers included in the se'uence se'uence to determine that all documents are there"
b"
Ces Ces
!amine invoices for controller0s approval"
c"
oD
2bserve the cashier preparing the deposit slip and delivering the deposit to the bank"
d"
Ces Ces
!amine sales invoice for initials"
e"
Ces Ces
!amine a sample of bank reconciliations for indication that the controller prepared each one"
f"
o
2bserve whether the supervisor is present and performing his responsibilities at the time employees check in"
g"
oD
2bserve president0s secretary opening mail and prelisting cash receipts" Also e!amine e!istence of prelisting"
D The primary primary concern concern in these these two two items is is the separati separation on of duties duties rather rather than the e!istence of the deposit slip and prelisting" The primary test of control procedure must therefore be observation"
)*+)-
13-2! a8 $RA+,AC$)O+-R&A$&* A*)$ O&C$)(&
D
78
.8
$&,$ O' CO+$RO PROC&*R&
,,$A+$)(& ,,$A+$)(& $&,$
)" !is !isti ting ng ac' ac'ui uisi siti tion on transactions are recorded" (3ompleteness
Account for numerical se'uence of receiving reports and trace to ac'uisitions .ournal entry"
Reconcile vendor statements to accounts payable listing"
-"
2bserve cash handling procedures and e!amine bank reconciliation to determine if was prepared by an independent person"
6repare a bank reconciliation as of the balance sheet date"
*" Reco Record rded ed tran transa sact ctio ions ns e!ist, recorded transactions are stated at the correct amounts, and transactions are properly classified" (2ccurrence, Accuracy, and 3lassification
!amine invoice packages for initials indicating that review has been performed"
!amine supporting invoices and recheck items checked by the clerk"
/" Reco Record rded ed tran transa sact ctio ions ns e!ist" (2ccurrenceD
!amine invoices for the controller0s initials"
!amine supporting invoices for same information e!amined by the controller"
8" Reco Record rded ed tran transa sact ctio ions ns e!ist" (2ccurrence
!amine invoices for indication of check number and date"
!amine supporting invoices, purchase orders, and receiving reports containing the proper check number and date for each cash disbursement"
!isting cash disbursement transactions are recorded, recorded transactions e!ist, and recorded transactions are stated at the correct amounts" (3ompleteness, 2ccurrence, and Accuracy"
The The ob.e ob.ect ctiv ives es satis satisfi fied ed depen depend d upon upon what what she she e!am e!amin ines es"" She She migh mightt for for e!ample e!amine supporting documents for accuracy and even for account classification" #n that event, those two ob.ectives would be added"
)*+)*
13-2" a/ CO+$RO AC$)()
%$)" -"
#nde #ndepe pend nden entt che check cks s on Accuracy performance 6roper authori1ation Accuracy
*"
Ade' Ade'ua uate te docu docume ment nts s or records
/"
#nde #ndepe pend nden entt che check cks s on Timing performance #nde #ndepe pend nden entt che check cks s on 6osting and performance summari1ation
8" ) * + ) -
7/ $RA+,AC$)O+R&A$&* A*)$ O&C$)(&,/
2ccurrence 3ompleteness
9"
#nde #ndepe pend nden entt che check cks s on 3lassification performance
;"
6roper authori1ation
?"
#nde #ndepe pend nden entt che check cks s on 2ccurrence performance Accuracy Ade' Ade'ua uate te docu docume ment nts s 2ccurrence or records
@"
)" Separation of duties
2ccurrence
2ccurrence
./
d/
$&,$ O' CO+$RO
PO,,)& ),,$A$&&+$
!amine vendors0 vendors0 invoices for indication of recalculation 7etermine e!istence of approved price lists for ac'uisitions Account for a numerical numerical se'uence of receiving reports !amine vendors0 invoices for indication of comparison !amine indication of reconciliation reconciliation of the master file and control account !amine vendors0 invoices for indication of internal verification
A misstatement misstatement in calculation calculation of a vendor0s invoice
e/ ,,$A+$)(& A*)$ PROC&*R&
Recalculation of vendors0 invoices 2btain prices from purchasing department and compare to vendors0 invoices 3onfirm 3onfirm account accounts s payable, payable, espec especiall ially y vendors with small or 1ero balances
3utoff misstatements
6erform search for unrecorded liabilities Eisstatements in master file or $oot subsidiary records and compare control account to control account
!amine cancelled checks for signature !amine vendors0 invoices for indication of comparison
#nvalid or unauthori1ed payment #nvalid or unauthori1ed payment
3ompare vendors0 invoices to ac'uisitions .ournal for reasonableness of account classification !amine supporting documents for appropriateness of e!penditures !amine supporting documents for appropriateness of e!penditures
!amine supporting documents for indication of cancellation 2bserve check mailing procedures and in'uire about normal procedures
7uplicate payment for an ac'uisition
!amine supporting documents for every payment to selected vendors
%ookkeeper takes signed check and changes payee name
3ompare payee name on cancelled check to supporting documents
)*+)/
Account classification classification misstatements
13-3#
a"
b"
)" Automated control embedded in computer software -" Eanual control control whose whose effectiv effectiveness eness is based based significant significantly ly on #T+ #T+ generated information *" Automated Automated control control embedded embedded in computer computer software software /" Eanual control control whose whose effectiv effectiveness eness is based based significant significantly ly on #T+ #T+ generated information 8" Eanual control control whose whose effectiv effectiveness eness is not significant significantly ly reliant reliant on #T+generated information )"
The e!t e!tent of of te testing of th this co control co could be si significantly reduc reduced ed in subs subse' e'ue uent nt year years s if effe effect ctiv ive e contr control ols s over over program and master file changes are in place" Such controls would would increas increase e the likeli likelihoo hood d that that the invent inventory ory softwa software re program that contains the automated control and the related invent inventory ory master master file file are not sub.ect sub.ect to an unautho unauthori1 ri1ed ed change" change" #f the audito auditorr determin determines es that no changes changes have have been made to the automated control, the auditor can rely on prior year audit tests of the controls controls as long as the control is tested at least once every third year audit" #f the control mitigates mitigates a significant significant risk, the control control must be tested tested in the current year&s audit" -" The e!tent e!tent of testing testing of this control control could could be moderately moderately reduced reduced in subse'uent years if effective controls over program and mast master er file file chan changes ges are are in plac place" e" Such Such cont control rols s woul would d increase the likelihood that the printout of prices accurately reflects actual prices used by the system to record inventory transactions" Ade'uate controls over the master file would decrease the likelihood that prices approved by the sales and purchasing department managers have been changed without without authori1ati authori1ation" on" Fowever, Fowever, because this control is also dependent on manager review of computer generated output (e"g", a human process sub.ect to error, some testing may be re'uired each year, although the amount of testing may be reduced by strong general controls" *" The The e!te e!tent nt of test testin ing g of this this cont contro roll coul could d be sign signif ific ican antl tly y reduc reduced ed in subs subse' e'ue uent nt year years s if effe effect ctiv ive e contr control ols s over over program and master file changes are in place" Such controls would would increas increase e the likeli likelihoo hood d that that the invent inventory ory softwa software re program that processes the automatic purchase order and the related inventory master file of product numbers are not sub.ect to an unauthori1ed change" /" The e!tent e!tent of testing testing of this control control could could be moderately moderately reduced reduced in subs subse'u e'uen entt years years if effe effect ctiv ive e cont contro rols ls over over prog progra ram m changes changes are in place" place" Such contro controls ls would would increas increase e the likelihood that the purchasing system software program that identifies purchases e!ceeding G), per vendor functions accurately" Fowever, because this control is also dependent on manager review of the computer generated e!ception listing, some testing may be re'uired each year" )*+)8
13-3# 13-3# .on .onti tinu nued ed//
8" %ecause %ecause this control control is not dependent dependent on technolo technology gy processes, processes, the strength of general controls over program and master file changes is likely to not have an impact on the e!tent of testing of this review by the sales department manager" 13-31
a" The The perf perfor orma manc nce e of inte interi rim m tes tests ts of con contr trol ols s and and subs substa tant ntiv ive e tests of transactions is an effective means of keeping overtime to a mini minimu mum m wher where e many many clien clients ts have have the the same same year+ year+en end d date date"" Fowever, this approach re'uires additional start+up time each time the the audi audito torr ente enters rs the the fiel field d to perf perform orm addit addition ional al test tests s duri during ng different times of the year" #n the case of a small client, start up costs and training time may re'uire more total time than waiting until after 7ecember *)" b" Schaefer may find that it is acceptable to perform no additional tests of controls and substantive tests of transactions work as a part of the year+end audit tests under the following circumstances: )" The res result ults of the the tests of the the interi erim perio riod indica dicatte the accounting system is reliable" -" #n'u #n'uir irie ies s conc concer erni ning ng the the rem remai aini ning ng per perio iod d may may indi indica cate te the there re were ere no sign signif ific ican antt chan change ges s in inter nterna nall cont contro roll and and accounting procedures" *" The The tran transa sact ctio ions ns occu occurr rrin ing g betw betwee een n the the comp complletio etion n of the the tests of controls and substantive tests of transactions and the the end end of the the year ear are are not not unus unusua uall comp compar ared ed to the the transactions previously tested and to the normal operations of the company" /" 2the 2therr tes tests ts perf perfor orme med d at at the the end end of of the the year ear do not not ind indic icat ate e that the internal controls are less effective than the auditor has currently assessed" 8" The The rem remaini aining ng per perio iod d is not not too too lon long g in the the cir circu cums msttance ances" s" (Some (Some conse consens nsus us e!is e!ists ts in the the profe profess ssio ion n re'ui re'uirin ring g the the remaini remaining ng period period to be three three months months or less, less, dependi depending ng upon the circumstances" 9" 2ther mat matters of co concer cern to the audit ditor indicate that the limit limitat atio ion n of inte interi rim m test testing ing is appro appropri priat ate e (i"e (i"e", ", risk risk of e!posure to legal sanction is not too great> the auditor will probabl probably y be famili familiar ar with with the client client0s 0s operat operation ions s and will will determine that a reduced control risk is .ustified> the auditor has appropriate confidence in the competence of personnel and the integrity of management"
)*+)9
;"
All All key key cont contro rols ls rel relat ated ed to to fina financ ncia iall repo report rtin ing g are are test testab able le at at interim periods by the auditor of a public company who must issue an opinion on internal controls over financial reporting" (Some key controls may only be performed by the client as part of the year+end closing process and thus can only be tested by the auditor at year end"
c"
#f Schae Schaeffer deci decide des s to perfo perform rm no addi addittiona ionall test tests of con conttrols rols and and subs ubstant antive tests of tran ransac sactions, depe epending upo upon the circums circumstan tances ces,, she may wish wish to perform perform analyt analytica icall procedu procedures, res, such such as revie reviewi wing ng interi interim m tran transac sacti tion ons s for for reaso reasona nabl blen enes ess s or trac tracin ing g them them to thei theirr source source,, comp compar arin ing g bala balanc nces es to prev previo ious us periods, or other such procedures, for the remaining period to year+ end"
d"
#f Schaefer is auditing a public company, she must perform sufficient tests of controls to provide her a basis for issuing an opin opinio ion n on the the opera operati ting ng effe effect ctiv iven eness ess of those those contr control ols s over over financial reporting" Schaefer&s approach to performing interim tests of controls in August through ovember would be appropriate for the audit of internal control over financial reporting" Schaefer needs to begin testing early enough in the year to ensure that she can test contr control ols s enou enough gh to prov provid ide e a suff suffic icien ientt basi basis s for for repo report rtin ing g on inte intern rnal al cont control rols s over over fina financ ncia iall repor reporti ting ng"" %eca %ecaus use e some some key controls may only be performed by the client as part of the year+end closing process, Schaefer may have to e!tend her testing beyond ovember since year+end closing controls can only be tested by the auditor at year end"
13-32 a"
The The se'u se'uenc ence e the the audi audito torr shoul should d foll follow ow is: is: *" )" /" -"
Assess control risk" 7ete etermine whether it is cost ost effective to perform tes tests of controls" 6erform tests of controls" 6erf 6erfor orm m sub subst stan anti tive ve test tests s of of deta detailils s of bala balanc nces es""
)*+);
The only logical se'uences for parts b through e are shown as follows: E F
A
B
G
H
C
D
D
D
Any other se'uence is not cost effective or incorrect" $or $o r e!ample: , A, , 3 would be the se'uence when there is planned reduced assessed control risk and effective results of tests of controls" b"
The The se'uenc se'uence e is , A, F, 7" The The logic logic was was reason reasonab able le"" The audi audito tor r believed the internal controls would be effective and it would be cost effe effect ctiv ive e to perf perfor orm m test tests s of cont control rols" s" #n perfo perform rmin ing g the the test tests s of cont contro rols ls the the audit auditor or concl conclude uded d the the cont contro rols ls were were not effe effect ctiv ive" e" Therefore, e!panded substantive tests of details of balances were needed" c" The se'u se'uen ence ce is , %, , 3" The audi audito torr concl onclu uded ded the inter interna nall controls may be effective, but it was not cost effective to reduce assessed control risk" The auditor should not have performed tests of controls" #t would have been more cost effective to skip performing tests and instead follow the se'uence , %, 7" d" The The se'uen se'uence ce is $, A, , 3" The logic logic is not reaso reasona nabl ble" e" When When the auditor concluded the controls were not effective he or she should have gone immediately to 7 and performed e!panded substantive tests of details of balances" e" The se'u se'uen ence ce is $, 7" The logi logic c was reas reason onab able le"" The audi audittor conclu concluded ded that that intern internal al contro controls ls were were not effect effective ive,, theref therefore ore the auditor went directly to substantive tests of details of balances and performed e!panded tests"
)*+)?
13-33 6R237
A<7#T
TSTS 2$ 32TR2HS
S<%STAT#= TSTS 2$ TRASA3T#2S
AAHCT#3AH AAHCT#3AH 6R237
TSTS 2$ 7TA#HS 2$ %AHA3S
)
S
S
-
E
S
E
*
E
S, D
E S
a"
b"
I I I I
!tensive amount of testing" Eedium amount of testing" Small amount of testing" o testing" S,D I Small am a mount of of te testing fo for th the gr gross ba balance in in accounts receivable> e!tensive testing done for the collectibility of the accounts"
$or $or audi auditt ) the the reco recomm mmen ende ded d stra strate tegy gy is is to ma! ma!im imi1 i1e e the the tes testi ting ng of of internal controls and minimi1e the testing of the details of all ending balances in inventory" The most important ob.ective would be to mini minimi mi1e 1e the the numbe numberr of loca locati tion ons s that that need need to be visi visite ted" d" The The .ustification for doing this is the 'uality of the internal controls and the the resul results ts of prio priorr years years00 audit audits" s" Assumi ssuming ng that that some some of the the locations have a larger portion of the ending inventory balance than other locations, the auditor can likely completely eliminate tests of physical counts of some locations and emphasi1e the locations with larger dollar balances" The entire strategy is oriented to minimi1ing the need to visit locations" Audi Auditt risk risk for for thi this s audi auditt shou should ld be be low low beca becaus use e of the the pla plans ns to to sell sell the business, severe under+financing and a first year audit" The lack of controls over accounts payable and the large number of ad.usting entries in accounts payable indicate the auditor cannot consider the internal controls effective" Therefore the plan should be to do e!tensive tests of details of balances, probably through accounts payable confirmation and other end of year procedures" o tests of controls are recommended because of the impracticality of reduc reduced ed assess assessed ed cont contro roll risk" risk" Some Some subst substant antiv ive e test tests s of transactions transactions and analytical analytical procedures are recommended recommended to verify the correctness of ac'uisition ac'uisitions s and to obtain obtain information information about the reasonableness of the balances"
)*+)@
c"
The The most most serio serious us conc concer ern n in thi this s audi audit is the eval evalua uattion of the the allowance allowance for uncollectib uncollectible le accounts" accounts" iven the adverse adverse economic economic conditions conditions and significan significantt increase increase of loans receivable, receivable, the auditor auditor must be greatly concerned about the ade'uacy of the allowance for uncollectib uncollectible le accounts accounts and the possibility possibility of uncollectib uncollectible le accounts accounts being included included in loans receivable" receivable" iven the internal internal controls, controls, the auditor is not likely to be greatly concerned about the gross accounts receivable balance, e!cept for accounts that need to be written off" Therefore, for the audit of gross accounts receivable there will be a greatly reduced assessed control risk and relatively mino minorr confi confirm rmat atio ion n of acco accoun unts ts recei receiva vabl ble" e" #n eval evalua uati ting ng the the allowance for uncollectible accounts, the auditor should test the contr control ols s over over grant grantin ing g loans loans and and foll follow owin ing g up on coll collec ecti tions ons"" Fowever, given the changes in the economy, it will be necessary to do significant additional testing of the allowance for uncollectible accou account nts" s" There Therefo fore re an JSJ JSJ is incl includ uded ed for for test tests s of deta detailils s of balances for gross accounts receivable and an JJ for the tests of net reali1able value"
13-34 a"
$actors $actors whic which h could could e!plain e!plain the the differ differenc ence e in the amoun amountt of evidenc evidence e accumulated in different parts as well as the total time spent on the engagement are: )" -" *" /" 8" 9" ;" ?" @" )"
#nternal control Eate aterial rialiity of the account balance Si1e of the populations Eakeup of of populations #nitial vs" repeat engagement Res Results ults of the curr curren entt and and prev previo ious us audit udits s !istence nce of unus nusual ual tran ransac sactions ons Eoti Eotiva vati tion on of the the cli client ent to misst misstat ate e the the fin finan anci cial al stat statem emen ents ts 7egree of client integrity Reli Relian ance ce by thi third rd part partie ies s on the the audi audite ted d fina financi ncial al sta state teme ment nts s
$or an e!ample, in the first audit, the partner has apparently made the decision to emphasi1e tests of controls and substantive tests of transactions and minimi1e tests of details of balances" That impl implie ies s effe effect ctiv ive e inte intern rnal al cont contro rols ls and and a low low e!pe e!pect ctat atio ion n of misstatemen misstatementt (low inherent and control risk" risk" #n the third audit, the partner apparently has a high e!pectation of misstatements, and therefore believes it is necessary to do e!tensive tests of controls and substantive tests of transactions, as well as e!tensive tests of details of balances" Audit two is somewhere between audit one and three"
)*+-
b"
The The audi auditt part partne ners rs cou could ld hav have e spent spent tim time e disc discus ussi sing ng the the aud audit it app appro roac ach h and scope with %ryan prior to the beginning of the field work" c" The nature of these three engagements and the different circumstances appear to be e!cellent e!amples of the tailoring of audi udit procedur dures to appro propri priate ate levels consideri ering the circumstances" %ryan0s .udgment could have been improved on each engagement if the audit partner discussed the audit approach with her during the engagement" d"
#n the the fir first st aud audit it,, the the part partne nerr has has appa appare rent ntly ly mad made e the the deci decisi sion on to to emphasi1e tests of controls and substantive tests of transactions and minimi minimi1e 1e tests tests of detail details s of balanc balances" es" While While this this approach approach would be consistent with the integrated audit of a public company&s financial statements and internal control over financial reporting, the e!tent of testing of controls for the cash disbursements transactions would be e!tensive like that described described in the third audit so that the auditor obtains a sufficient basis to report on internal controls"
a"
The The foll follow owin ing g is a time time line line for for the the audi auditt proc proced edur ures es,, show showin ing g the the se'uence of the parts of a typical audit"
13-35
Kuly *) 8, @, ;, -
Audit Report 7ate ?
)
*
/
9
6arts 8, @, and ; are all a part of planning planning and are therefore therefore done early" These are in the se'uence shown in 3hapter ?" As part of plan planni ning ng the the audi audit, t, the the audi audito torr obta obtain ins s an unde underst rstan andi ding ng of internal internal control and initially assesses control risk" The auditor auditor then performs tests of controls and substantive tests of transactions and reassesses control risk" #deally, most analytical procedures are performed after the client has prepared financial statements, but before tests of details of balances are performed" Therefore, they should be done before confirmation of accounts payable to provide information about the e!pectation of misstatement" 3onfirmation of accounts payable should be done as early as possible possible after the balance balance sheet date to facilitate facilitate getting getting responses responses back, performing performing alternative alternative procedures procedures for nonresp nonrespons onses, es, and reconc reconcili iling ng differ difference ences s before before the audit audit is completed"
)*+-)
b"
Tests for review of subse'uent events are normally the last procedures done on the engagement before the audit report date" The audit report is issued after the audit report date" The The time time lin line e show shows s that that 8, 8, @, ; and and - are are fre fre'u 'uen enttly don done e bef before ore the balance sheet date"
Cases
13-36
a" The The ma. ma.or or defi defici cien enci cies es in the the aud audit it and and the the reas reason ons s for for thei their r occurrence are: )"
-"
*" /"
8" 9"
The change nge in the the accounting sys system to computeri1e the the inve invent ntor ory y, a chan change ge in acco accoun unti ting ng pers person onne nel, l, and and the the e!istence of a few more errors in the tests of controls should have alerted the auditors to e!pand the scope of the work" #t was 'uestionable to conclude that the internal controls were effective" Redu Reduct ctio ion n in the the sco scope pe of of the the inv inven enttory ory wor work k base based d on the the lack of errors last year was improper since new internal controls were in use with new personnel this year and the inventory balance was higher" The The new new divi divisi sion on sho shoul uld d have have been been aud audit ited ed mor more e tho thoro roug ughl hly y" #t came to Eerkle through merger and was likely to have different operating characteristics and internal controls" The determination that the errors in the sample were imma immate teri rial al was was impr improp oper er"" The The erro errors rs should should have have been been pro. pro.ec ecte ted d from from the the samp sample le to the the popu popula lati tion on,, and and the the pro.ect pro.ected ed error error should should have have been been compare compared d to tolera tolerable ble missta misstatem tement ent,, after after consider considering ing risk" risk" The obsole obsolesce scence nce problem uncovered in the audit should have been evaluated care careffully ully to cons consiider der the impl implic icat atiions ons on pot potent ential ial obsolescence of inventory" iven the new personnel on the engagement, %rewer apparent apparently ly failed failed to ade'uat ade'uately ely supervi supervise se and review review the work of assistants" There was an apparent lack of the use of analytical proce procedur dures" es" A decl declin ine e in sale sales s shoul should d have have warne warned d the the audi audito torr to a pote potent ntia iall decl declin ine e in prof profit its s and and obso obsole lete te inventory"
)*+--
b"
c"
%rew %rewer er shou should ld hav have e been been aw aware are that that the the inv inven ento tory ry int inter erna nall cont contro rols ls and the personnel in that department were new, that the interim tests revealed more errors than normal, and that the inventory tests revealed more errors than normal despite the reduction in scope" #n this situation, the scope of the inventory work should have been increased to reveal the magnitude of the problems encountered" #n addition, because of the staff turnover on this engagement, %rewer should have devoted more of his time to supervising the work of the staff on this engagement" The The lik likel elih ihoo ood d of of %re %rewe werr los losin ing g the the suit suit is high" high" The The aud audit itors ors appe appear ar not to have followed general standards ) and * and standards of field work ), -, and * in the performance of the engagement" Although the misstatements result from fraud, the auditors may be held responsible because apparently the audit was not conducted in accordance with AAS"
13-3 13-3 Part Part )
a"
() ssess acceptable audit risk " under both audit approaches" (-
ssess inherent risk "
This This would would be done done
This This wou would ld be be done done under under both both
approaches" (*
!btain an understanding of internal control " This would be
done done unde underr both both appr approac oaches hes,, howe howeve ver, r, it may may be more more e!tensive e!tensive where control control risk is reduced below the ma!imum ma!imum due to the knowledge gained through testing" (/
would be done ssess control risk at less than 1"" " This would only under the Jreducing control riskJ approach, given that the client is a non+public n on+public entity"
(8
$erform anal%tical procedures " This This would would be be done done under under
both approaches, although such procedures may be more e!tensive where control risk is reduced below the ma!imum" (9
This would would be done done under under ssess planned detection risk " This both approaches"
)*+-*
b"
c"
The The Jred Jreduc ucin ing g cont contro roll risk riskJJ appr approa oach ch has has sev sever eral al adv advan anta tage ges: s: )"
#t sho shou uld res resu ult in in low lower over overal alll audi auditt cost cost"" This This wi will occ occur ur where the client0s business activity is comple! and its volume of transa transacti ctions ons is large" large" #n this this type type of situat situation ion,, intern internal al controls can provide a great deal of assurance that many of the financial statement assertions are correct, and the audit effort to test those controls can be significantly less than full+ scale substantive tests of balances would re'uire"
-"
$or $or very very lar large ge aud audit its, s, it woul would d be impo imposs ssib ible le to comp comple lete te the the audit on time and at an acceptable cost without relying on controls" Harge clients are usually publicly held and must file their $orm )+L with the S3 within 9 days of their fiscal year year end" end" Thes These e larg large e comp compani anies es gener general ally ly have have many many locations, locations, including including worldwide worldwide operations" operations" 3ontrols must be relied upon to do these audits"
*"
The The more more det detai aile led d inve invest stig igat atio ion n of con contr trol ols s that that is is re'u re'uir ired ed to to reduc reduce e cont contro roll risk risk,, incl includi uding ng test testin ing, g, prov provid ides es a bett better er understanding of the system" This not only may provide a more concret concrete e basis basis for conduct conducting ing substan substantiv tive e tests, tests, it creates more opportunities to make useful recommendations to the client"
/"
6erf 6erfor orma manc nce e of deta detail iled ed tes testts of tran transa sact ctiions ons creat creates es the the oppor opportu tuni nity ty to reveal reveal empl employ oyee ee defa defalc lcat atio ions ns that that woul would d othe otherw rwis ise e not not be disco iscov vered ered"" #n addi addittion, ion, empl employ oyee ee knowledge that transactions will be e!amined serves as a deterrent to defalcation in the first place"
The primary adv advantage age of the Jsu Jsubst bstanti ntiveJ app approa roach is one of efficiency" Where clients are smaller, there is less opportunity to ade'uately segregate core duties, which makes it more difficult to rely on controls" controls" Thus, the the auditor auditor focuses the audit audit work on the balance sheet as of the end of the client0s fiscal year" $urthermore, by going into the client0s office at one point in time and doing the entire audit, auditor scheduling problems are reduced and there is less disruption to the client"
)*+-/
13-3 Part ))
a"
"); "); is the the lev level el of of dete detect ctio ion n risk risk for for tes tests ts of of the the inve invent ntor ory y bala balanc nce e that that will will prov provid ide e an overa overallll audit audit risk of "8 "8 assu assumi ming ng test tests s of controls and analytical procedures are conducted as planned and achieve the e!pected results (i"e", don0t indicate any misstatements e!ceeding a tolerable amount" Thus, as individual tests of details of inventory are planned, their design would be based on that level of risk of failing to reveal a greater+than+tolerable misstatement"
b"
T7R I
"8 )" ! )" ! "9
T7R I "? c"
The reducti ction of ris risk that can can be tak taken for for deta etailed tes tests of the the inventory balance means that more reliance must be placed on those detailed tests" #n this case, the degree of allowable risk is cut in half" #n terms of sample si1e, this will result in a significant increase (the e!act impact will depend on the sampling method used" #t is also possible the auditor may feel less comfortable relying on analytical procedures to the e!tent otherwise planned, and may believe some other detailed tests are appropriate"
Part )))
#t is not appropriate to JreworkJ the Audit Risk Eodel as proposed by the staff person" The Audit Risk Eodel is a planning model that is based on testin testing g the hypoth hypothesi esis s that that the financ financial ial statem statement ents s do not contain contain a materia materiall missta misstatem tement ent"" #f an indica indicatio tion n of a possib possible le missta misstatem tement ent is reve reveal aled ed by apply applyin ing g the the mode modell at an% stage, the hypothesis must be re.e re.ect cted ed and and the the audi auditt plan plan revi revise sed d to assu assume me ther there e is a mate materi rial al misstatemen misstatementt that must be sub.ected sub.ected to measurement" measurement" Stated differently differently,, the Audit Risk Eodel does not provide for contingent probabilities, which occur as the model is reworked based on findings as it is applied"
)nternet Pro7lem ,olution; Assessing &99e.ts o9 &viden.e i
Auditors develop overall audit plans to ensure that they obtain Jsufficient appropriate appropriate audit evidence"M evidence"M To this end, auditors employ various types of audit tests, tests, or audit audit procedu procedures" res" The e!tent e!tent to which which auditor auditors s use differ different ent audit audit proce procedur dures es and and the the timi timing ng of thos those e proc procedu edure res s is a matt matter er of prof profess essio ional nal .udgment that depends upon a number of factors" 7ecisions about the mi! of audit procedures and the timing of procedures significantly impact the speed with which an audit report can be issued" 13-1
)"
What What fac facto tors rs wil will an audi audittor like likely ly cons consid ider er when when det determ erminin ining g the types and timing of audit proceduresN )*+-8
13-1 .ontinued/ Answer; The auditor&s selection (i"e", mi! of audit procedures is
impa impact cted ed by a numb number er of fact factors ors inclu includi ding ng the the avai availa labi bilility ty of differ different ent types types of audit audit evidenc evidence, e, the costs costs associa associated ted with with the various procedures, effectiveness of the client&s internal controls, and the presen presence ce of inherent inherent risk risk factors" factors" The timin timing g of audit audit proc proced edur ures es is infl influe uenc nced ed by sev several eral fact actors ors incl includ udiing the effectiveness of the client&s internal controls, when the client needs the audit to be completed, when the audit evidence will be most effe effect ctiv ive e (i"e (i"e", ", inte interi rim m versu versus s year+ year+en end d and and avai availa labl ble e (e"g" (e"g",, electronic evidence may be available for a limited period of time, and when members of the audit staff are available" -"
=isi =isitt web web site sites s for for Ca CahooO hooO Phtt Phttp: p:BB BBww www w"yaho "yahoo" o"co comB mBQ, Q, 3is 3isco co Sys Syste tems ms,, #nc"P http:BBwww"cisco"comBQ, and Ec7onald0s Phttp: Phttp:BBw BBwww ww"m "mcdon cdonald alds"c s"comB omBQ" Q" 7eterm 7etermine ine each each compan company0s y0s fiscal fiscal year+end and the date of the auditor0s report for the most recent fiscal year" Fow do you e!plain your findingsN Speculate on how the auditors0 strategies might differ for these companies" =isit the companies& websites to determine the latest applicable dates for reports" Student e!planations will likely vary> however, students should consider the possibility of an increased reliance on tests of controls and the use of interim testing, the effectiveness of the company&s internal controls, and the presence of electronic evidence" The audit report dates for these companies& companies& -8 reports range from appro!imately /8 days to 98 days after year+end" This suggests e!tensive reliance on controls and testing prior to year+end" year+end" This 'uestion 'uestion provides provides a segue to a discussion discussion regardi regarding ng the increas increasing ing pressur pressure e felt felt by compan companies ies to release release financial statement results soon after year+end and the resultant pressure on the company&s auditors to perform their audits more 'uickly 'uickly"" Cou may wish wish to ask the students students to consider consider how this pressure may impact audit 'uality and risk" Answer;
(+ote: #nternet problems address current issues using #nternet sources" %ecause #nternet sites are sub.ect to change, #nternet problems and solutions are sub.ect to chang hange" e" 3urr 3urren entt inf informa ormattion ion on #nte #ntern rne et probl roblem ems s is avai availa labl ble e at www"prenhall"comBarens"
)*+-9
