EP AUDITING+ASSURANCE...-MYACCT.LAB
16th Edition
ISBN: 9780134148656
Author: ARENS
Publisher: PEARSON CO
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Chapter 15, Problem 4RQ
To determine
Explain the meaning of block sample selection and how an auditor can obtain five blocks of 20 sales invoices from a sales journal.
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Which of the following audit procedures uses “a purchase transaction” as the sampling unit?
A.
Trace customer orders to the purchase journal.
B.
Trace purchase transactions from the purchase journal to the customer orders.
C.
All of the options use “a purchase transaction” as the sampling unit.
D.
Trace receiving reports to the purchase journal.
E.
Examine purchase orders for evidence of the manager’s approval.
The 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…
This problem requires the use of ACL software, which is includedin the CD attached to the text. Information about installing and using ACL and solvingthis problem can be found in Appendix, pages 830–834. You should read all of thereference material, especially the material on sampling, to answer questions a. through e.For this problem use the “Inventory” file in the “Inventory_Review” subfolder undertables in Sample_Project. Suggested commands, where applicable, are indicated at the endof the problem requirements.a. Calculate the sample size and sampling interval for an MUS sample based on inventory value at cost (Value). Use a confidence level of 90%, materiality of $40,000,and expected errors of $2,500. (Sampling/Calculate Sample Size; select “monetary”radio button)b. What is the sampling size and sampling interval if you increase materiality to$50,000 and decrease expected errors to $1,000?c. Select the sample based on the sampling interval determined in part a. (Sampling /Sample…
Chapter 15 Solutions
EP AUDITING+ASSURANCE...-MYACCT.LAB
Ch. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Prob. 11RQCh. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - Distinguish between the TER and the CUER. How is...Ch. 15 - Prob. 15RQCh. 15 - Prob. 16RQCh. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Prob. 20RQCh. 15 - Prob. 21RQCh. 15 - Prob. 22.1MCQCh. 15 - Prob. 22.2MCQCh. 15 - Prob. 22.3MCQCh. 15 - Prob. 23.1MCQCh. 15 - Prob. 23.2MCQCh. 15 - Prob. 23.3MCQCh. 15 - Prob. 24.1MCQCh. 15 - Prob. 24.2MCQCh. 15 - Prob. 24.3MCQCh. 15 - Prob. 25.1MCQCh. 15 - Prob. 25.2MCQCh. 15 - Prob. 25.3MCQCh. 15 - Prob. 27DQPCh. 15 - Lenter Supply Company is a medium-sized...Ch. 15 - Prob. 29DQPCh. 15 - Prob. 30DQPCh. 15 - Prob. 31DQPCh. 15 - Prob. 32DQPCh. 15 - Prob. 33DQPCh. 15 - Prob. 34DQPCh. 15 - Prob. 35DQPCh. 15 - Prob. 36CCh. 15 - Prob. 37ICA
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Similar questions
- 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_forwardWrite a 2-3 paragraphs on the following topics, using 12-point Times New Roman font. What is the difference between forensic accounting and auditingarrow_forwardhe 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_forward
- Sample Selection. Hunter McNeal is studying and evaluating Branyon’s internal controlsrelated to the mathematical verification of sales invoices. In this verification, Branyon’s control activities require that employees perform the following procedures:∙ Verify that sales invoices are prepared only for items actually shipped to customers. Thisactivity is evidenced by requiring employees to place a checkmark next to quantities onthe sales invoices.∙ Verify that prices charged to customers are from approved price lists. This activityis evidenced by requiring employees to place a checkmark next to prices on the salesinvoice.∙ Verify that extensions and footings on invoices are mathematically accurate. This activityis evidenced by requiring employees to initial the bottom of the invoice in a sectionmarked “Mathematically verified by.”To verify the operating effectiveness of these activities, McNeal established an expectedpopulation deviation rate of 3 percent, a tolerable rate of deviation…arrow_forwardAudit Sampling: Types of Audit Samples. You have been assigned to the audit of Phillip’sInc., a chain of convenience stores. As part of the audit planning, you decide to perform thefollowing tests:1. Perform a walkthrough of purchase transactions by selecting one purchase and following itthrough all processing steps from the initial purchase order to recording in the general ledger.2. Select a sample of purchase vouchers and ensure they are supported by receivingdocuments. 3. Select a sample of payroll checks and agree the time to the time cards and ensure theyhave supervisor approval. Using the sample, project the total payroll expense for the year.4. Select a sample of items from the inventory on hand and estimate the total inventory onhand at the balance sheet date.5. Vouch all long-term debt issued during the year to the loan agreement and the cashreceived.6. Select a sample of long-term debt agreements and ensure they have been approved in theboard of directors’ minutes.7.…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
- Briefly identify and explain the four methods used to select sample items.arrow_forwardAs part of your annual audit plan, you will be conducting an audit of the Purchases-Payables cycle. And to effectively plan for the audit, you have to document your understanding of the said process using a flowchart. This is also part of your usual planning procedures which will be expected from you by your Audit Manager. As a result of your interviews, observations, understanding of the process’ policies and procedures; you were able to gather the following data: The requests to purchase materials or the Purchase Requisition (PR) are prepared by the Purchasing department which is confirmed by the inventory controllers. These are approved by authorized personnel based on the company’s Approval Matrix. After confirmation of the PR, Purchasing Department will prepare the Purchase Orders (PO). These POs do not undergo further approval as long as supported by approved by PRs. A copy of the PO is sent to the vendor and another copy of the same PO to the Receiving personnel. Another copy…arrow_forwardComputer-assisted audit techniques (CAATs) can be used to audit inventory. Describe FOUR (4) audit procedures on which this technique can be used.arrow_forward
- As part of your annual audit plan, you will be conducting an audit of the Purchases-Payables cycle. And to effectively plan for the audit, you have to document your understanding of the said process using a flowchart. This is also part of your usual planning procedures which will be expected from you by your Audit Manager. As a result of your interviews, observations, understanding of the process’ policies and procedures; you were able to gather the following data: The requests to purchase materials or the Purchase Requisition (PR) are prepared by the Purchasing department which is confirmed by the inventory controllers. These are approved by authorized personnel based on the company’s Approval Matrix. After confirmation of the PR, Purchasing Department will prepare the Purchase Orders (PO). These POs do not undergo further approval as long as supported by approved by PRs. A copy of the PO is sent to the vendor and another copy of the same PO to the Receiving personnel. Another copy…arrow_forwardInput validation includes field interrogation that examines the data in individual fields. List four validation tests and indicate what is checked in each. Please give specific examples for each one of them.arrow_forwardIn order to determine whether accounts payable are understated, auditors wish to obtain a sample of purchase transactions from suppliers and how they were recorded in the accounting books. � , sampling is the best mechanism to obtain this type of samples. a . discovery b . attributes c . random digits d . variablesarrow_forward
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