| Course | ACC 546 Auditing (ACC/546) |
|---|---|
| Week | 4 |
| Paper type | Internal control evaluation paper |
| Length | about 1,153 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | MS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 546 Week 4
A Clean Opinion on the Statements and an Adverse One on Controls: A Top-Down Integrated Audit That Finds a Material Weakness in Unbilled Revenue at a Composite Listed Staffing Company
[Student Name]
University of Phoenix
ACC/546: Auditing
Week 4 Assignment
[Instructor Name]
[Date]
The staffing company, its systems and the findings are composites written for a model paper; standards, frameworks and research findings come from the sources listed.
A composite staffing company places about 9,000 temporary workers a week with hospitals, engineering firms and corporate offices across the country and reports revenue of about $1.1 billion. Clients are billed weekly from approved timesheets, but hours worked late in a period are often approved and billed after period end, so the company accrues unbilled revenue each quarter. This year it moved billing to a new cloud system, replacing software it had used for twelve years. The company is an accelerated filer, and its auditor performs an integrated audit of its financial statements and internal control (Public Company Accounting Oversight Board, 2007). An integrated audit asks two questions that can have different answers: are these numbers right, and could the company's controls have been relied on to make them right? This paper follows the control evaluation.
The Top-Down Approach
The standard directs auditors to begin at the financial statement level, with the overall risks to internal control, then to entity-level controls and then to significant accounts, relevant assertions and the key controls that address the risks. The framework is the COSO internal control framework, which the company uses (Committee of Sponsoring Organizations of the Treadway Commission, 2013).
Entity-level controls were effective: the board and audit committee oversee financial reporting actively, the company has a code of conduct and a hotline and management reviews monthly results by business line. These controls set the tone but are not precise enough to detect misstatements in specific accounts.
Significant Accounts and Key Controls
Revenue and accounts receivable, including unbilled revenue, are significant accounts because of their size and the judgment in the accrual, with occurrence, accuracy and cutoff as relevant assertions. Unbilled revenue at year end was $74 million, well above materiality of $4.5 million. The team selected two key controls. First, a monthly review by the revenue accounting manager of the unbilled accrual, comparing estimated hours with timekeeping data by client, investigating differences over $50,000 and approving the entry. Second, IT general controls over the new billing system, particularly access controls restricting who can change bill rates and approve timesheets.
Testing the Review Control
The team selected four monthly reviews and reperformed them. In two, the manager had approved the accrual without investigating differences over the threshold; one difference was $1.8 million, caused by a large hospital client's hours being counted twice after a system migration. The manager signed the review checklist but kept no evidence of investigation. The control did not operate effectively.
Testing Access to the Billing System
IT specialists found that during the three months after the new system went live, 62 users had administrative rights allowing them to change bill rates and approve timesheets, far more than needed, including recruiters whose compensation depends on revenue. Logs were not reviewed. The access control failed during that period, and because the review control also failed, the team could not rely on the system-generated data used in the accrual.
Evaluating Severity
A deficiency's severity depends on whether there is a reasonable possibility that it could fail to prevent or detect a misstatement and on the magnitude of the potential misstatement. The unbilled accrual is large, the review failed in half of the months tested, the duplicated hours were not caught by the control and inappropriate access could have allowed revenue to be inflated through rate changes. The team considered compensating controls. The monthly business line review by management examines revenue trends but at an aggregated level, with thresholds above materiality, so it is not precise enough to compensate. The combination of the two deficiencies represents a reasonable possibility of a material misstatement not being prevented or detected. It is a material weakness.
The Two Opinions
Because a material weakness existed at year end, the auditor will issue an adverse opinion on internal control over financial reporting, describing the weakness. That opinion does not decide the financial statement opinion. The team expanded substantive testing: it recalculated the year-end unbilled accrual from timekeeping records for all clients, confirmed a sample of unbilled amounts with clients and tested billing after year end to confirm the hours were real and rates correct. It found and management corrected the $1.8 million duplication, the only misstatement above the trivial threshold in revenue. With the correction, the evidence supports an unmodified opinion on the financial statements.
Remediation
Management removed unnecessary access, implemented quarterly access reviews and log monitoring, retrained the revenue accounting team and added a second-level review by the controller with documented investigation of differences. Remediated controls must operate for a sufficient period before they can be concluded effective, so the auditor will test them in the next year. Until then, the weakness remains disclosed in each quarterly report.
Management's Own Assessment
The company's management must also assess internal control and report its conclusion. Management reached the same conclusion as the auditor, a material weakness, after the auditor shared its findings and management's internal audit group confirmed the access problem independently. Management's report describes the weakness, its effect and the remediation plan. Had management concluded that controls were effective while the auditor found a material weakness, the auditor's report would still be adverse, and the disagreement would be evident to readers.
Disclosure Controls
Separately, the chief executive and chief financial officers certify each quarter on disclosure controls and procedures. With a material weakness in internal control over financial reporting at year end, management concluded that disclosure controls were also not effective as of that date, a conclusion reported in the annual filing.
Why Access Matters in Staffing
In a staffing business, recruiters and branch managers earn commissions on the revenue their placements generate. Access that lets them change bill rates or approve timesheets creates both opportunity and incentive, the conditions fraud research highlights. The team therefore extended its data analytics to compare bill rates with contracts for all clients during the three months of excessive access; it found no unauthorized rate changes, which supported the financial statement opinion but did not cure the control failure.
Research on Weaknesses and Their Remediation
Ashbaugh-Skaife et al. (2008) found that companies reporting internal control deficiencies had lower accrual quality and that those that remediated showed improvement, evidence that the control opinion carries information about earnings quality. Investors reading the adverse opinion alongside an unmodified financial statement opinion are told both that this year's numbers are supported and that the process producing them needed repair.
Conclusion
The top-down evaluation found effective entity-level controls but failures in the unbilled revenue review and billing system access, together a material weakness. The auditor will issue an adverse opinion on internal control and, after expanded substantive work and a $1.8 million correction, an unmodified opinion on the financial statements. Remediation is under way and will be tested next year.
References
Ashbaugh-Skaife, H., Collins, D. W., Kinney, W. R., Jr., & LaFond, R. (2008). The effect of SOX internal control deficiencies and their remediation on accrual quality. The Accounting Review, 83(1), 217-250. https://doi.org/10.2308/accr.2008.83.1.217
Committee of Sponsoring Organizations of the Treadway Commission. (2013). Internal control, integrated framework.
Public Company Accounting Oversight Board. (2007). An audit of internal control over financial reporting that is integrated with an audit of financial statements (Auditing Standard No. 5).
What the ACC 546 Week 4 instructions ask
ACC 546 Week 4 centers on how auditors judge internal control over financial reporting, especially in integrated audits of public companies. Typical requirements include the COSO framework, the top-down, risk-based approach, entity-level controls, identifying significant accounts and relevant assertions, selecting and testing key controls, IT general controls, grading each deficiency by severity, from an ordinary deficiency up to a material weakness, the auditor's report on internal control and the effect of control findings on the financial statement audit. Many prompts include a case with control test results. The paper should apply the standards to specific findings, reach conclusions on both opinions and cite the standards and research in APA style.
How this ACC 546 Week 4 example is built
A staffing company's revenue depends on hours worked by thousands of temporary employees, much of it unbilled at period end, which makes its revenue controls both important and vulnerable. The paper follows the top-down path the standard describes, starting with the control environment and moving to the accounts and assertions at risk. Two key controls are tested and fail: a manual review of the unbilled revenue accrual and the access controls over a new billing system. The severity evaluation is shown step by step, including compensating controls considered and rejected. The paper then explains the adverse internal control opinion, why the financial statements could still receive a clean opinion and how the company remediated.
ACC 546 Week 4 grading rubric: where the points go
Graduate grading for this week usually rewards correct use of the top-down approach, sound selection of key controls, careful evaluation of deficiency severity and a correct understanding of how control findings affect both opinions. Faculty check that significant accounts and assertions are identified before controls are selected, that IT general controls are linked to the automated or information-dependent controls they support, that severity is judged by the reasonable possibility and magnitude of misstatement, with compensating controls considered, and that a material weakness leads to an adverse opinion on internal control. The effect on substantive procedures should be explained. Cited standards and research complete the evaluation.
ACC 546 Week 4 help: mistakes to avoid
A common ACC 546 Week 4 error is concluding that a material weakness means the financial statements must receive a modified opinion. The two opinions are separate: if substantive testing supports the statements, their opinion can be unmodified while the control opinion is adverse. Another is evaluating a deficiency only by what did go wrong; the test is whether a material misstatement could reasonably possibly occur and not be prevented or detected. Students also skip compensating controls. Consider them explicitly and say why they are or are not precise enough. Start from entity-level controls. Link IT failures to the controls that depend on them. Finally, describe remediation and when it can be tested.
Related ACC 546 sample papers
Other ACC 546 week samples
- ACC 546 Week 1: The Profession and the Auditor's Role
- ACC 546 Week 2: Planning the Audit
- ACC 546 Week 3: Audit Reporting and Communications
- ACC 546 Week 5: Programs for Current Accounts
- ACC 546 Week 6: Programs for Other Cycles
More MS in Accounting sample papers
- ACC 541 Week 4: Debt, Contingencies and Segments
- ACC 542 Week 4: Information System Risks and Controls
- ACC 543 Week 4: Notes and Secured Transactions
- ACC 545 Week 4: Consolidated Financial Statements
ACC 546 Week 4 questions, answered
What does ACC/546 Week 4 usually cover?
It usually covers evaluating internal control over financial reporting: COSO, the top-down approach, key and IT general controls, deficiency severity and the auditor's report on internal control.
Where can I find a free ACC 546 Week 4 sample paper?
This page walks through a staffing company's integrated audit and material weakness, with a margin comment on each judgment, and there is no charge to read it. Your own control evaluation case can be drafted for you free.
What is a material weakness?
A control gap, alone or with others, serious enough that a material error in the financial statements could reasonably possibly slip through without being prevented or caught in time.
Can a company get a clean audit opinion with a material weakness?
Yes. The auditor can issue an unmodified opinion on the financial statements if substantive testing supports them, while issuing an adverse opinion on internal control over financial reporting.
What is the top-down approach?
An approach that begins at the financial statement level with entity-level controls and works down to significant accounts, relevant assertions and the key controls that address their risks.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official University of Phoenix document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
Request this one custom, free · All ACC 546 week samples · All courses