Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 14, Problem 23.3MCQ
To determine
Identify the audit test that would help to test the completeness assertion for sales.
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For each of the following audit procedures, state which type of evidence-gathering technique is being used: (1) inspection or (2) computation or (3) confirmation or (4) analytical procedures or (5) enquiries or (6) observation.
Agreeing the total of the accounts receivable subsidiary ledger to the accounts receivable general ledger
Discussing the adequacy of the allowance for doubtful debts with the credit manager.
Comparing the current year gross margin with the gross margin for the last four years.
Examining a new machine to ensure that this major acquisition was
Watching the client’s warehouse personnel count the raw materials
Performing test counts of the warehouse personnel’s count of the raw
Obtaining a letter from the client’s solicitor indicating that there were no lawsuits in progress against the
Tracing the prices used by the client’s billing program for pricing sales invoices to the client’s approved price
Sending a written request to the client’s customers requesting that…
Indicate whether each of the following audit procedures is a testof controls, a substantive test, or a dual-purpose test. Next, indicate the financial statement assertion most closely related to each audit procedure.
Required:a. Vouch recorded sales invoices to supporting shipping documents.b. Inspect recorded sales invoices for credit approval.c. Vouch recorded sales invoices prices to the approved price list.d. Send confirmations to all customers regarding accounts receivable.e. Recalculate the arithmetic accuracy of the recorded sales invoices.f. Compare the shipment date of recorded sales invoices with the invoice record date.g. Trace recorded sales invoices to posting in the general ledger control account and in the correct customer’s account.h. Select a sample of shipping documents from the shipping department file and trace shipments to recorded sales invoices.i. Scan recorded sales invoices and shipping documents for missing numbers in sequence.j. Vouch sales invoices and…
Which audit procedure is most effective in testing credit sales for overstatement?(1) Trace a sample of postings from the sales journal to the sales account in thegeneral ledger.(2) Vouch a sample of recorded sales from the sales journal to shipping documents.(3) Prepare an aging of accounts receivable.(4) Trace a sample of initial sales orders to sales recorded in the sales journal.
Chapter 14 Solutions
Auditing And Assurance Services
Ch. 14 - Describe the following documents and records and...Ch. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQ
Ch. 14 - Prob. 11RQCh. 14 - Prob. 12RQCh. 14 - Prob. 13RQCh. 14 - Prob. 14RQCh. 14 - Prob. 15RQCh. 14 - Prob. 16RQCh. 14 - Prob. 17RQCh. 14 - Prob. 18RQCh. 14 - Prob. 19RQCh. 14 - Prob. 20.1MCQCh. 14 - Prob. 20.2MCQCh. 14 - Prob. 20.3MCQCh. 14 - Prob. 21.1MCQCh. 14 - An auditor is performing substantive tests of...Ch. 14 - Prob. 22.3MCQCh. 14 - Prob. 23.1MCQCh. 14 - Prob. 23.2MCQCh. 14 - Prob. 23.3MCQCh. 14 - Prob. 24DQPCh. 14 - Prob. 25DQPCh. 14 - Prob. 26DQPCh. 14 - Prob. 27DQPCh. 14 - Prob. 28DQPCh. 14 - Prob. 29DQPCh. 14 - Prob. 30DQPCh. 14 - Prob. 31DQPCh. 14 - Prob. 32DQPCh. 14 - Prob. 33DQPCh. 14 - Prob. 34DQPCh. 14 - Prob. 37ICA
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Similar questions
- he 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.arrow_forwardWhich of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? O Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. O Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions. O Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.arrow_forwardWhich of the following would provide an auditor with the most reliable evidence reguarding the existence of accounts receivable? A. A copy of the invoice sent to the customer. B. Acopy of the customer's sales order held by the client. C. An accounts receivable confirmation received by the auditor from the client's customer. D. An aging schedule showing the composition of the year-end-accounts receivable balance.arrow_forward
- Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?a. Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable.b. Examine a sample of cash disbursements in the period subsequent to year-end.c. Examine a sample of invoices a few days prior to and subsequent to the year-end to ascertain whether they have been properly recorded.d. Examine unusual relationships between monthly accounts payable and recorded purchases.arrow_forwardWhich 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_forwardFor each of the accounts balances and associated assertions below, select the audit procedure from the list provided that gives the most appropriate audit evidence for the account assertion. Accounts Balance Assertion Procedure Inventory Completeness a. Examine invoices from suppliers. b. Examine invoices paid after year-end and trace to subsidiary ledger. c. Select items located in the inventory warehouse and trace to the inventory listing. d. Trace sales invoices and shipping documents just after year-end to customer accounts. Cash Rights and obligations a. Agree bank statement to the subsidiary ledger. b. Agree the cash balance per the bank reconciliation to the year-end bank statement. c. Review the bank confirmation for information on compensating balances. d. Trace deposits per the bank statement to the cash subsidiary ledger. Accounts Receivable Existence a. Review confirmation of accounts receivable…arrow_forward
- Imagine that you were auditing accounts receivable balances to confirm sales and found significant discrepancies between the recorded account balances and returned confirmations from customers. Recommend an alternative approach to confirming sales revenue. Provide a rationale for your recommendation.arrow_forwardTo 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.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
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