EBK AUDITING AND ASSURANCE SERVICES
16th Edition
ISBN: 8220103453462
Author: Hogan
Publisher: Pearson Education (US)
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Question
Chapter 16, Problem 1RQ
To determine
Differentiate between test of details of balances, tests of controls and substantive tests of transactions for the sales and collection cycle. Also, determine the effect of tests of controls and substantive test over test of details of balances.
Expert Solution & Answer
Explanation of Solution
Difference between test of details of balances, test of control and substantive tests of transactions for sales and collection cycle are as mentioned below:
- Test of details of balances: are used to identify whether the statements of transaction are valid and correct or not. It is a method of collection of facts and figures that supports the statements. For example: An auditor can use prepaid income liabilities account by examining each of the prepaid income balance.
- Test of control and substantive test of transaction for the sales and collection cycle: are focused upon verifying whether the internal control of the
audit process are working or not and also to test the actuality of the transaction in the financial statements. For example: Inspection of a fixed asset
The test of control and substantive test of transaction results affects the
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Students have asked these similar questions
Distinguish among tests of details of balances, tests of controls,and substantive tests of transactions for the sales and collection cycle. Explain how thetests of controls and substantive tests of transactions affect the tests of details of balances.
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Chapter 16 Solutions
EBK AUDITING AND ASSURANCE SERVICES
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Explain why you agree or disagree with the...Ch. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 10RQ
Ch. 16 - Under what circumstances is it acceptable to...Ch. 16 - Prob. 12RQCh. 16 - Prob. 13RQCh. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - Prob. 16RQCh. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Prob. 19.1MCQCh. 16 - Prob. 19.2MCQCh. 16 - c. After a CPA has determined that accounts...Ch. 16 - The following questions deal with confirmation of...Ch. 16 - Prob. 20.1MCQCh. 16 - Prob. 20.2MCQCh. 16 - Prob. 21.1MCQCh. 16 - Prob. 21.2MCQCh. 16 - Prob. 21.3MCQCh. 16 - Prob. 22.3MCQCh. 16 - Which of the following is least likely to be a...Ch. 16 - The following questions concern auditor...Ch. 16 - Prob. 23DQPCh. 16 - Prob. 25DQPCh. 16 - Prob. 24DQPCh. 16 - The following misstatements are sometimes found in...Ch. 16 - Prob. 27DQPCh. 16 - Niosoki Auto Parts sells new parts for foreign...Ch. 16 - Prob. 29DQPCh. 16 - Prob. 30DQPCh. 16 - (OBJECTIVES 16-2, 16.3) The Albring Company sells...Ch. 16 - Prob. 36C
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Similar questions
- Explain how management assertions, general balance-relatedaudit objectives, and specific balance-related audit objectives are developed for anaccount balance such as accounts receivable.arrow_forwardWhat types of audit procedures are typically performed in testing operating effectiveness of controls over the revenue and collection cycle?arrow_forwardWhat are the goals of dual-direction testing regarding an audit of the accounts receivable andcash collection system?arrow_forward
- Explain the primary functions of internal controls procedures in the accounting areaarrow_forwardExplain the importance of proper credit approval for sales. Whateffect do adequate controls in the credit function have on the auditor’s evidence accumulation?arrow_forwardWhat is the purpose of analytical reviews in the audit of revenue cycle accounts? Please give an example.arrow_forward
- Entity-level controls can have a pervasive effect on the entity's ability to meet the control criteria. Which one of the following is not an entity-level control? A. The period-end financial reporting process B. Controls to monitor results of the operations C. Controls to monitor the inventory taking process D. Management's risk assessment processarrow_forwardWhich 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 journalarrow_forwardWhat are the primary stages and controls in the accounts payable transaction cycle, from receiving vendor invoices to verifying, recording, and making payments to vendors?arrow_forward
- Listed in the table below are some common audit procedures. For each procedure below: Identify whether it is a test of control (TOC), substantive test of transaction (STOT), analytical procedure (AP) or a test of details of balances (TODOB). Write your answer in the 2nd column of the table below. State one audit objective that is being satisfied. Write your answer in the 3rd column of the table below. Procedure (a) Type of Test (b) Audit Objective Example: Compare the quantity and description of items on duplicate sales invoices with related shipping documents. STOT Accuracy 1.Foot the list of accounts payable and trace the balance to the general ledger. 2. Account for the sequence of purchase orders 3. Select a sample of purchase transactions from purchase journal and trace them to vendors’ invoices and statements 4. Exam cash payments subsequent to the balance date to see if they are related to unrecorded…arrow_forwardAt which points in the revenue cycle are independent verification controls necessary?arrow_forward
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