Explain the role of sales volume, cost, and profitability in an audit? How do sales volume, cost, and profitability evaluate the effectiveness of the sales organization?
Q: Attribute Sampling and Monetary-Unit Sampling are two sampling techniques designed to help an…
A: Monetary-Unit Sampling and Attribute Sampling are two different type of sampling techniques widely…
Q: How might an auditor use a client’s sales forecast for general familiarity with the production cycle…
A: Production Cycle: The process that accounts the conversion of raw materials to work-in-progress…
Q: Which of the following management assertions is an auditor most likely testing if the audit…
A: Management Assertion: Management assertion refers to the claim made by the management assuring…
Q: Which of the following test controls most likely would help assure an auditor that goods shipped are…
A: In order to test the effectiveness of the control so as to detect the material misstatement, an…
Q: What is the importance of considering both past results and industry trends in comparing values,…
A: An integrated audit is defined as an auditing, which used to involve an audit through an outside…
Q: An auditor most likely would analyze inventory turnover rates to obtain evidence concerning…
A: Inventory turnover rate is the rate which shows how many times a company has sold and replaced it's…
Q: How does an audit enhance the quality of financial statements and management’s reports on internal…
A: The requirement that corporations' financial accounts be audited by an impartial external auditor…
Q: What is a post-audit, why do firms use them, and what problems can arise when they are used?
A: Post Audit: It is a technique that is used for the evaluation of performance by comparing the actual…
Q: The auditor is verifying whether all goods received by the company have been recorded appropriately.…
A: Auditor is one who audits the financial statement of company so as to provide fair view on the…
Q: the auditor is verifying whether all goods received by the company have been recorded appropriately.…
A: Source Documents - Source documents are the document using which auditor can check the genuineness…
Q: he auditor of Kent Ltd selects a sample from the file of shipping documents in order to confirm that…
A: An audit report is provided by an independent auditor that contains the opinion of the auditor on…
Q: How many the specific audit tests for the Sales & Revenue Cycle?
A: Sales & Revenue Cycle: This cycle is made up of various classes of transactions with respect…
Q: Your audit client is under intense pressure to meet an earnings target. Which transaction assertion…
A: Assertions are the procedural claims that determine whether the financial statements are fairly…
Q: When an audit team traces a sample of shipping documents to the related sales invoice copies, they…
A: Accounts Receivables: Accounts receivables are those accounts that occur due to incomes for which…
Q: a) Audit tests include tests of controls and substantive procedures. Substantive procedures can be…
A: Substantive Audit tests are performed to test the materiality of the elements. These tests are…
Q: A typical objective of an operational audit is for the auditor toa. Determine whether the financial…
A: OPTION C IS THE ANSWER
Q: What is the purpose of analytical reviews in the audit of revenue cycle accounts? Please give an…
A: An analytical review is used by auditors to assess the reasonableness of account balances. A CPA…
Q: An audit trail enables a person to trace a source document to its ultimate effect on the financial…
A: Audit trails are manual or electronic records that are chronologically defined events to provide…
Q: What is the term used to describe a systematic process of objectively obtaining evidence regarding…
A: Auditing is a systematic process that helps in providing a true and fair picture of the financial…
Q: Which of the following procedures would provide the most reliable audit evidence?a. Inquiries of the…
A: Audit Evidence: Audit evidence is the proof in the form of receipts, invoice and other documents…
Q: State one test of control and one substantive test of transactions that the auditor can use to…
A: Test of Control: It means testing and analyzing the control used and set by an entity to check the…
Q: Would drill-down be an effective audit tool for identifying an unusual business relationship between…
A:
Q: Indicate whether each of the following audit procedures is a testof controls, a substantive test, or…
A:
Q: Explain why you agree or disagree with the following statement:“In most audits, it is more important…
A: I agree with the given statement as in most audits, it is much important to test carefully the…
Q: Before expressing an opinion concerning the audit of income and expenses, theauditor will best…
A: Auditing: Auditing refers to an independent examination of financial information of any…
Q: ng dre You are appointed as an auditor for Sohar Electric Trading Company and finds that ontrols…
A: The auditors need to identify the risk of material statements in the financial report and respond…
Q: connection of audit quality on reducing business risk
A: An audit is a process of checking and verifying the books of account and financial information of…
Q: discuss the process of auditing the following: • Inventories • Revenues • Segment Reporting
A: Auditing is defined as the on-site verification activity of a process or quality system, such as…
Q: As an internal audit explain how you applied it in your company?
A: In order to evaluate the true and fair financial position of the company, an internal auditor is…
Q: Describe the users of audited financial statements and the decisions that they need to make based on…
A: Users of Financial statements: When referring to users of financial statements, we're talking about…
Q: To gather audit evidence about the proper credit approval of sales (i.e., valuation assertion), the…
A: Audit is the detailed process of checking and verifying books of accounts and financial information…
Q: Audit tests include tests of controls and substantive procedures. Substantive procedures can be…
A: Substantive Audit tests are performed to test the materiality of the elements. These tests are…
Q: What types of audit procedures are typically performed in testing operating effectiveness of…
A: Test of Controls: The test of controls includes the procedures that are developed to generate…
Q: Your audit client is under intense pressure to meet an earnings target. Which transaction assertion…
A: There are various types of transaction assertions. These includes; Accuracy, Completeness,…
Q: Why is the audit of revenue recognition riskier for a new company
A: According to the GAAP, the companies should not claim any revenue until they have provided the…
Q: b. Existence and completeness objectives. c. Existence, realisable-value and accuracy o
A: The right answer is c. Existence, realizable-value and accuracy objectives.
Q: Listed in the table below are some common audit procedures. For each procedure below: Identify…
A: An audit of financial statements is an examination conducted by an independent auditor on the…
Q: Which of the following best represents a key control for ensuring sales are properlyauthorized when…
A:
Q: Explain the importance of proper credit approval for sales. Whateffect do adequate controls in the…
A: Auditing is a process which is used by audit professionals to review or analyze the transactions and…
Q: Indicate a specific audit procedure under each of the following categories, as applied particularly…
A: Audit: It is a procedure for examining a company's financial statements. The goal of auditing is…
Q: A major objective of written representations is toa. Shift responsibility for financial statements…
A: The auditor requires collecting sufficient and appropriate audit evidence during the audit for…
Q: Which of the following audit procedures is a test of control?
A: The audit is the process of the official inspection of the books of accounts of a company. There are…
Q: The following questions concern types of audit tests.Choose the best response.a. The auditor looks…
A: Answer: Option 2.
Q: Analytical procedures are an important part of the audit process and consist of the evaluation of…
A: Planning the audit Audit planning is the vital and detailed program gives instructions about how…
Q: Critically evaluate whether the manner in whic
A: An audit is the examination of an organization's financial statements - as provided in its annual…
Q: (Substantive tests and audit evidence) In meeting the third standard of field work, the auditor may…
A: Auditors employ the test of details to verify the specifics of particular transactions or balances.…
Explain the role of sales volume, cost, and profitability in an audit?
How do sales volume, cost, and profitability evaluate the effectiveness of the sales organization?
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- Professional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements. a. Identify the activities that affect the revenue cycle. b. Identify the financial statement accounts typically associated with the revenue cycle.An important task ¡n the audit of the revenue cycle is determining whether a client has appropriately recognized revenue. a. What is the five-step process that companies should use in recognizing revenue? Why might the auditor need to do additional research and consider additional criteria on revenue recognition? b. The following are situations in which the auditor will make decisions about the amount of revenue to be recognized. For each of the following scenarios, labeled (1) through (6): . Identify the key issues to address in determining whether or not revenue should he recognized. . Identify additional information the auditor may want to gather in making a decision on revenue recognition. . Based only on the information presented, develop a rationale for either the recognition or nonrecognition of revenue. 1. AOL sells software that is unique as a provider of Internet services. The software contract includes a service fee of $19.95 for up to 500 hours of Internet service each month. The minimum requirement is a one-year contract. The company proposes to immediately recognize 30% of the first-year’s contract as revenue from the sale of software and 70% as Internet services on a monthly basis as fees are collected from the customer. 2. Modis Manufacturing builds specialty packaging machinery for other manufacturers. All of the products are high end and range in sales price from $5 million to $25 million. A major customer is rebuilding one of its factories and has ordered three machines with total revenue for Modis of $45 million. The contracted date to complete the production was November, and the company met the contract dare. The customer acknowledges the contract and confirms the amount. However, because the factory is not yet complete, it has asked Modis to hold the products in the ware house as a courtesy until its building is complete. 3. Standish Stoneware has developed a new low-end line of baking products that will be sold directly to consumers and to low-end discount retailers. The company had previously sold high-end silverware products to specialty stores and has a track record of returned items for the high-end stores. The new products tend to have more defects, but the defects are not necessarily recognizable ¡n production. For example, they are more likely to crack when first used in baking. The company does not have a history of returns from these products, but because the products are new, it grants each customer the right to return the merchandise for a full refund or replacement within one year of purchase. 4. Omer Technologies is a high-growth company that sells electronic products to the custom copying business. It is an industry with high innovation, but Omer’s technology is basic. In order to achieve growth, management has empowered the sales staff to make special deals to increase sales in the fourth quarter of the year. The sales deals include a price break and an increased salesperson commission but not an extension of either the product warranty or the customer’s right to return the product. 5. Electric City is a new company that has the exclusive right to a new technology that saves municipalities a substantial amount of energy for large-scale lighting purposes (e.g., for ball fields, parking lots, and shop ping centers). The technology has been shown to be very cost effective in Europe. In order to get new customers to try the product, the sales force allows customers to try the product for up to six months to prove the amount of energy savings they will realize. The company is so confident that customers will buy the product that it allows this pilot-testing period. Revenue is recognized at the time the product is installed at the customer location, with a small provision made for potential returns. 6. Jackson Products decided to quit manufacturing a line of its products and outsourced the production. However, much of its manufacturing equipment could be used by other companies. In addition, it had over $5 million of new manufacturing equipment on order in a noncancelable deal. The company decided to become a sales representative to sell the new equipment ordered and its existing equipment. All of the sales were recorded as revenue.How many the specific audit tests for the Sales & Revenue Cycle?
- Explain the importance of proper credit approval for sales. Whateffect do adequate controls in the credit function have on the auditor’s evidence accumulation?Describe the FASB's rules or standard on revenue recognition. Where do we find the FASB's revenue recognition standard? Why is it important for an auditor that will audit sales to understand the revenue recognition standard?To gather audit evidence about the proper credit approval of sales (i.e., valuation assertion), the auditor would select a sample of documents from the population represented by the a. Subsidiary customers' accounts ledger. b. Sales invoice file. c. Bill of lading file. d. Customer order file.
- Under what circumstances would an auditor choose to confirminformation such as the right of return or special sales terms in addition to the customerbalance?List the transaction-related audit objectives for the audit of salestransactions. For each objective, state one internal control that the client can use toreduce the likelihood of misstatementshe auditor of Kent Ltd selects a sample from the file of shipping documents in order to confirm that all sales shipped are invoiced and recorded in accounting records. This test will confirm:Select one:a. Valuation and allocation assertion for sales.b. Cut-off assertion for sales.c. Occurrence assertion for sales.d. Completeness assertion for sales.
- Which of the following audit procedures represent a substantive test of transaction that would validate managements assertion on occurrence of a purchase transaction a. Comparing the classification of the transaction based on the supplier's invoice with the company’s chart of accounts. b. Recalculation of the supplier's invoice to check its mathematical accuracy. c. Reviewing and scanning of the purchases journal for large or unusual amounts. d. Tracing from the file of receiving reports to the purchases journalYou are auditing Big Fresh Pty Ltd, and your manager has asked you to perform the following for the revenue account. Select a sample of sales from the sales journal and agree on the details in the journal to the sales invoices, delivery dockets and customer orders. Required: Explain which assertion for the revenue account would be addressed by this test and why? What kind of test of details is this? Any other assertion is provided by the above test apart from in part A.Auditing Sales/Revenue Transactions When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor first needs to consider the elements of the control environment. To assist the auditor in assessing the level of control risk, the following tests of controls were designed to allow the auditor to determine if the company’s related controls were operating effectively in the revenue cycle. Determine which of the four management assertion(s) apply to each individual sales (revenue) control being discussed. Hint: many have more than one assertion. Management Assertions: Existence & Occurrence, Rights, Completeness, Valuation 4. Years ago, the company purchased a software package that was used by other companies in the same industry (it was not specially made software). It was sold by a leading software company known for its highly-rated products. Which management assertions apply to this control?
