PRINCIPLES OF AUDITING
Title: Auditing Operations and Completing the Audit,
Date: March 25, 2014
Justin Kealey, CPA, is auditing Tustin Companies, Inc. Kealey has accumulated known and likely misstatements for the current year to evaluate whether there is a sufficiently low risk of material misstatement of the financial statements to issue an opinion. However, Kealey notes that there are several misstatements that have been carried over from prior years. A .Distinguish between the iron curtain and the rollover approaches to considering the misstatements from prior years. In consideration of an auditor’s approach for considering the effects of misstatements from prior years are the iron curtain and the rollover approach. The iron curtain approach reveals the effect of correcting the misstatements whole amount in the present year irrespective of when the misstatements occurred. The rollover approach reflects only the amount of misstatement originating in the existing income statements. It ignores the effect of misstatements caused within the balance sheet. B. Describe how SEC Staff Accounting Bulletin No. 108 requires auditors to consider misstatements carried over from prior periods. SEC, Staff Accounting Bulletin No. 108 in reference to materiality states that auditors consider both the iron curtain and rollover approach. Auditors suggest whenever making corrections of material misstatements in financial statements that corrections are made with the iron curtain or rollover approach. The following are typical questions that might appear on an internal control questionnaire for payroll activities: 1. Is there adequate separation of duties between employees who maintain human resources records and employees who approve payroll disbursements? It is important that originations separate human resources and support function as it enables prevention of payments to fictitious employees and...
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