Auditing and Assurance Services, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134075754
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 13, Problem 24DQP
To determine
(a) Indicate whether each procedure is a test of control or, substantive test of transactions, and (b) identify the type of evidence for each procedure.
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The following are commonly performed tests of controls and substantive tests of transactions audit procedures in the sales and collection cycle, acquisition and payment cycle, and inventory and warehousing cycle:
Account for a sequence of shipping documents and examine each one to make sure that a duplicate sales invoice is attached.
Compare the quantity and description of items on shipping documents with the related duplicate sales invoices.
Trace a sample of voucher packages to the acquisitions journal throughout the year to determine that the transaction is included in the acquisitions journal.
Determine if the transaction was recorded in the correct month, based on when the goods were received and the terms of the transaction.
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Required:
Identify for each test the related cycle.
Identify whether each audit procedure is a test of control or a substantive test of transactions.
State which of the six transaction-related audit objectives each of the audit procedures fulfills.
The following are audit procedures from different transaction cycles:1. Examine duplicate copy of shipping documents for evidence that quantities wereverified before shipment.2. Select a sample of payroll checks and agree hours to employee time records.3. Use audit software to foot and cross-foot the sales journal and trace the balance tothe general ledger.4. Examine voucher packages and related vendor invoices for evidence of approval ofaccount classification.5. Trace a sample of shipping documents to entry in the sales journal.6. Examine a sample of warehouse removal slips for signature of authorized official.7. Select a sample of entries in the cash receipts journal and trace to posting in individualcustomer accounts receivable records.8. Select a sample of sales invoices and agree prices to the approved price list.a. For each audit procedure, identify whether it is a test of control or a substantive testof transactions.b. For each audit procedure, identify the transaction-related…
The following are commonly performed tests of controls and substantive tests of transactions audit procedures in the sales and collection cycle:
Review the prelisting of cash receipts to determine whether cash is prelisted daily.
Reconcile the recorded cash receipts on the prelisting with the cash receipts journal and the bank statement for a one-month period.
Account for a sequence of shipping documents and examine each one to make sure that a related sales invoice exists.
Account for a sequence of sales invoices and examine each one to make sure that a related shipping document exists.
Compare the quantity and description of items on shipping documents with the related sales invoices.
Trace recorded sales in the sales journal to the related accounts receivable master file and compare the customer name, date, and amount for each one.
Examine sales returns for approval by an authorized official.
Required
Identify whether each audit procedure is a test of control or a…
Chapter 13 Solutions
Auditing and Assurance Services, Student Value Edition (16th Edition)
Ch. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Explain how the calculation and comparison to...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - For each of the eight types of evidence discussed...
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Prob. 16RQCh. 13 - Prob. 17RQCh. 13 - Prob. 18RQCh. 13 - Prob. 19RQCh. 13 - Prob. 20.1MCQCh. 13 - Prob. 20.2MCQCh. 13 - A conceptually logical approach to the auditors...Ch. 13 - Prob. 21.1MCQCh. 13 - Prob. 21.2MCQCh. 13 - Prob. 21.3MCQCh. 13 - Prob. 22.1MCQCh. 13 - b. Substantive analytical procedures are most...Ch. 13 - Prob. 22.3MCQCh. 13 - Prob. 23DQPCh. 13 - Prob. 24DQPCh. 13 - Prob. 25DQPCh. 13 - Prob. 26DQPCh. 13 - Prob. 27DQPCh. 13 - Prob. 28DQPCh. 13 - Prob. 29DQPCh. 13 - Prob. 30DQPCh. 13 - Prob. 31DQPCh. 13 - Prob. 32DQPCh. 13 - Prob. 33DQPCh. 13 - Prob. 35C
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- Which of the following test controls most likely would help assure an auditor that goods shipped are properly billed? A. Scan the sales journal for sequential and unusual entries. B. Examine shipping documents for matching sales invoice. C. Compare the accounts receivalbe ledger to daily sales summaries. D. inspect unused sales invoices for consecutive prenumbering.arrow_forwardThe following are audit procedures in the sales and collectioncycle:1. Add the columns on the aged trial balance and compare the total with the generalledger.2. Examine a sample of shipping documents to determine whether each has a salesinvoice number included on it.3. Examine a sample of customer orders and see if each has a credit authorization.4. Compare the date on a sample of shipping documents a few days before and afterthe balance sheet date with related sales journal transactions.5. Discuss with the sales manager whether any sales allowances have been grantedafter the balance sheet date that may apply to the current period.6. Observe whether the controller makes an independent comparison of the total inthe general ledger with the trial balance of accounts receivable.7. Compare the date on a sample of shipping documents throughout the year withrelated duplicate sales invoices and the accounts receivable master file.8. Compute the ratio of allowance for uncollectible accounts…arrow_forwardThe following are examples of audit procedures:  Watch employees count inventory to determine whether company procedures are being followed.  Count a sample of inventory items and record the amount in the audit files.  Calculate the ratio of sales commission expense to sales as a test of sales commissions.  Review the accounts receivable with the credit manager to evaluate their collectability.  Compare a duplicate sales invoice with the sales journal for customer name and amount.  Obtain a written statement from a bank stating that the client has $15,671 on deposit and liabilities of $500,000 on a demand note.  Add the sales journal entries to determine whether they were correctly totaled.  Obtain a letter from the client’s attorney addressed to the CPA firm stating that the attorney is not aware of any existing lawsuits.  Extend the cost of inventory times the quantity on an inventory listing to test whether it is accurate.  Obtain a letter from an…arrow_forward
- When an audit team traces a sample of shipping documents to the related sales invoice copies, they are trying to find relevant evidence thata. Shipments to customers were invoiced.b. Shipments to customers were recorded as sales.c. Recorded sales were shipped.d. Invoiced sales were shipped.arrow_forwardWhich of the following audit procedures is a dual-purpose test, which tests the effectiveness of internal controls as well as any material misstatements in the financial statements?  A. The auditor accounts for the sequence of sales invoices.  B. The auditor selects a sample of transactions in the sales journal and traces them to the relevant shipping documents.  C. The auditor adds the transactions in the purchase journal and agrees to the total amount recorded in the general ledger.  D. A test over the bank reconciliation.  E. The auditor obtains a sample of timesheets for casual employees and checks for evidence of approval.arrow_forwardof stion For a sample of sales transactions selected from the sales journal, verify that the amount of the transaction has been recorded in the correct customer account in the accounts receivable subledger. Choose the Audit Objective: Choose the specific audit objective →arrow_forward
- Determine whether each of the following procedures is a test of control or a substantive test. a) The auditor inspects a sample of sales orders to determine if the sales manager has approved the orders. b) The auditor sends a confirmation to the bank to verify the cash balance on hand. c) The auditor attends the inventory count and observes client personnel as they conduct the count. d) The auditor recalculates the amount of interest payable. e) Stand by the payroll time clock to determine whether any employee "punches in" more than one time.arrow_forwardYou are working on the audit of Frozen Fresh Ltd and have just completed an evaluation of controls in the sales receivable, and receipt area. You note the following key controls as part of your evaluation a all sales handled were supported by shipping documents. b. All sales once shipped have been invoiced and recorded in the accounting records. C) invoices have been recorded correctly. Required: For each of the controls (a to c) 1. Identity the assertion addressed by the control 2. Provide one common control policies and procedures in the organisation to address the assertions 3. Provide one procedure that could be used to test the control for the key control identifiedarrow_forwardBelow are some audit procedures. Classify each procedure according to the following types of audit evidence: 1) inspection, 2) external confirmation, 3) recalculation, 4) observation, 5) inquiry of the client, 6) reperformance, and 7) analytical procedure. (each procedure can be used more than once or not at all) Audit Procedures Count inventory items and record the amount in the audit working papers. Stand by the payroll time clock to determine whether any employee "punches in" more than one time. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year. Obtain information about the client's internal controls by asking questions of client personnel. Examine the purchase invoice for a piece of equipment and ensure that the equipment was received and is in operation. The auditor computes the debt covenant based on the financial information to ensure that the client's calculation was performed correctly. Obtain…arrow_forward
- Which of the following audit procedures is aimed most directly at testing the completeness assertion for accounts payable?   Footing the list of accounts payable.   Tracing shipping reports after year-end to related customer purchase orders and invoices.   Examining underlying documentation for cash disbursements in the period after year-end.   Tracing shipping reports issued on or before year-end to related customer purchase orders and invoices.arrow_forwardThe following are 11 audit procedures taken from an auditprogram:1. Foot the accounts payable trial balance and compare the total with the general ledger.2. Confirm accounts payable balances directly with vendors.3. Account for a sequence of checks in the cash disbursements journal to determinewhether any have been omitted.4. Examine vendors’ invoices to verify the ending balance in accounts payable.5. Compare the balance in payroll tax expense with previous years. The comparisontakes the increase in payroll tax rates into account.6. Examine the internal auditor’s initials on monthly bank reconciliations as anindication of whether they have been reviewed.7. Examine vendors’ invoices and other documentation in support of recorded transactions in the acquisitions journal.8. Multiply the commission rate by total sales and compare the result with commissionexpense.9. Examine vendors’ invoices and other supporting documents to determine whetherlarge amounts in the repair and maintenance…arrow_forwardThe purpose of an audit trail is to be able to trace a transaction through source documents to the final output or backwards from the final output to the original source documents to prove the accuracy and validity of ledger postings. Describe in detail the audit trail for the following in a manufacturing business: a. Shipping an order to a customer b. Customer returns defective goods c. Employee payroll for employee wages (using cards or time sheetsarrow_forward
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