Listed below are the management assertions that are contained in financial statements, and several financial statement misstatements. For each misstatement, indicate with the appropriate letter the assertion by management that is being violated. Assertion A. existence and occurrence B. completeness C. rights and obligation D. valuation or allocation Misstatement | 23. the client failed to include in their financial statements inventory that was consigned to others. 24. the client had a significant amount of damaged goods that were presented at cost 25. the client failed to describe in the financial E. Presentation and disclosure F. Accuracy and valuation G. Classification and understandability statement significant debt restrictions 26. the client recorded receivables that were fictitious 27. the client failed to pay its obligations to suppliers or failed to control their rights to assets.

Listed below are the management assertions that are contained in financial statements, and several financial statement misstatements. For each misstatement, indicate with the appropriate letter the assertion by management that is being violated. Assertion A. existence and occurrence B. completeness C. rights and obligation D. valuation or allocation Misstatement | 23. the client failed to include in their financial statements inventory that was consigned to others. 24. the client had a significant amount of damaged goods that were presented at cost 25. the client failed to describe in the financial E. Presentation and disclosure F. Accuracy and valuation G. Classification and understandability statement significant debt restrictions 26. the client recorded receivables that were fictitious 27. the client failed to pay its obligations to suppliers or failed to control their rights to assets.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: A Framework For Audit Evidence

Section: Chapter Questions

Problem 32MCQ

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In terms of the timing of the risk response, the following procedures can be completed only at or after period end: comparing the financial statements to the accounting records, evaluating adjusting journal entries made by management in preparing the financial statements, and conducting procedures to response to risks that management may have engaged in improper transactions at period end.
For each of the following brief scenarios, assume that you are reporting on a client’s financial statements. Select the type(s) of opinion (per below) possible for the scenario. In addition: Unless stated otherwise, assume the matter involved is material. If the problem doesn’t tell you whether a misstatement pervasively misstates the financial statements or doesn’t list a characteristic that indicates pervasiveness, two reports may be possible (i.e., replies 6 to 9). Do not read more into the circumstances than what is presented. Do not consider an auditor discretionary circumstance for modification of the audit report unless the situation explicitly suggests that the auditor wishes to emphasize a particular matter. * Note that this simulation has more parts than one would expect in a particular CPA exam simulation. We present it to provide examples of many types of reporting situations in one problem. Types of opinion may be used once, more than once, or not at all. 1. A…
During a review of a nonissuer’s financial statements, accountants are required to make certaininquiries of management. Which of the following inquiries is not required by the SSARS?a. The basis for the preparation of financial statements.b. Internal control deficiencies.c. Significant transactions occurring near the end of the reporting period.d. Material subsequent events
Noncompliance includes transactions entered by the entity’s employees and management in their personal capacity. The preliminary judgment or estimate about materiality represents the maximum amount by which a set of financial statements could be misstated and still not cause the auditor to believe that the decisions of reasonable users would be affected. Group of answer choices False, True True, False True, True False, False
A client’s purchasing system ends with the recording of a liability and its eventual payment. Which of the following best describes auditors’ primary concern with respect to liabilities resulting from the purchasing system?a. Accounts payable are not materially understated.b. Authority to incur liabilities is restricted to one designated person.c. Acquisition of materials is not made from one vendor or one group of vendors.d. Commitments for all purchases are made only after established competitive bidding procedures are followed.
TRUE OR FALSE? Management assertions are provided to the auditor in the assertions letter, but are not disclosed on the financial statements.
Which of the following statements about management assertions, audit objectives, and audit evidence is incorrect? Group of answer choices a. Management assertions are representations of management, whether express or implied, about classes of transactions, account balances, and presentation and disclosure in the financial statements. b. Audit objectives remain the same from audit to audit but audit evidence may vary. c. An auditor may design more than one audit procedures to validate the same assertion. d. Audit procedures designed to evaluate one assertion may not be used anymore to evaluate another assertion.
Under which of the following circumstances would a disclaimer of opinion not beappropriate?(1) The auditor is unable to determine the amounts associated with an employeefraud scheme.(2) Management does not provide reasonable justification for a change in accountingprinciples.(3) The client refuses the auditor permission to confirm certain accounts receivableor apply alternative procedures to verify their balances.(4) The chief executive officer is unwilling to sign the management representationletter.
The preliminary judgement about materiality is the ______________ amount by which the auditor believes the statements could be misstated and still not affect the economic decisions of users. The missing word in this sentence is: a. Average b. Minimum c. Maximum d. Median
At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the: a. Engagement letter. b. Management letter. c. Management representation letter. d. Legal representation letter.
The following are types of management assertions in the financial statements that an auditor must evaluate Question 1 options: a) Valuation b) Completeness c) Accuracy d) All of the above e) None of the above
Auditors commonly allocate materiality to balance sheet accounts rather than income statement accounts because most income statement misstatements have a effect on the balance sheet. Select one: a. equal b. undetermined C. increased d. reduced O O O