Connect Access Card for Principles of Auditing & Other Assurance Services
21st Edition
ISBN: 9781260299366
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Chapter 17, Problem 28OQ
To determine
Identify for the given situations whether the audit report should include the emphasis-of-matter paragraph on consistency.
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Which of the following is least likely to be a procedure included in an accountant’s review of interim financial information of a public entity?
a.Compare disaggregated revenue data by month to that of the previous interim period.
b.Read available minutes of meetings of stockholders.
c.Inquire of management concerning significant journal entries and other adjustments.
d.Observe counting of physical inventory.
In connection with the planning phase of an audit engagement, which of the following statements is always correct?
a. Final staffing decisions must be made prior to completion of the planning stage
b. Observation of inventory count should be performed at year-end
c. A portion of the audit of a continuing audit client can be performed at interim dates
d. An engagement should not be accepted after the client’s financial year-end
Jones, CPA, has completed the audit of Sarack Lumber Supply Co.and has issued a standard unqualified report. In addition to a report on the overall financialstatements, the company needs a special audited report on three specific accounts: sales,net fixed assets, and inventory valued at FIFO. The report is to be issued to Sarack’s lessor,who bases annual rentals on these three accounts. Jones was not aware of the need for thereport on the three specific accounts until after the overall audit was completed.a. Explain why Jones is unlikely to be able to issue the audit report on the three specificaccounts without additional audit tests.b. What additional tests are likely to be needed before the report on the three specificaccounts can be issued?c. Assuming that Jones is able to satisfy all the requirements needed to issue the reporton the three specific accounts, write the report. Make any necessary assumptions.
Chapter 17 Solutions
Connect Access Card for Principles of Auditing & Other Assurance Services
Ch. 17 - Prob. 1RQCh. 17 - What is the function of notes to financial...Ch. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Indicate how the auditor could use substantive analytical procedures in resting the following accounts: a. Interest expense related to bonds outstanding. b. Natural gas expense for a public utility company. c. Supplies expense for a factory. d. Cost of goods sold for a fast-food franchisor (e.g., Wendy’s or McDonald’s). Note that cost of goods sold tends to average about 35% of sales in fast-food franchises. e. Salary expense for an office (region) of a professional services firm.arrow_forwardWhich of the following procedures is usually performed by the auditor to determine if obsolete inventory exists? a. Footing the inventory subsidiary ledger b. Analysis of inventory turnover and sales reports c. Sample the inventory reported by the client, examine the purchase date and receiving reports d. Confirmation of inventory with client’s customers Which statement is true? a. The incomplete recording of asset disposals understates the asset balance b. Management may be incentivized to over-recognize impairments on machinery when the company is doing really well to lower the subsequent depreciation expenses c. Management never over-accrue impairments on machinery because it reduces the balance of assets d. Management may be incentivized to over-recognize impairments on machinery when the company is doing really well because auditors will be more skeptic over the performance that is “too good to be true”arrow_forwardWhich of the following audit procedures is the best test of the accuracy, valuation and allocation assertion for inventory? Select one: a. Obtaining the last receiving record numbers for the period and checking that they were taken up correctly b. Confirming stock held on consignment c. Comparing standard costs to actual sales prices. d. Attending the annual stocktakearrow_forward
- The auditor generally decides whether the inventory count can be taken before year-end primarily on the basis of: audit efficiency. accuracy of the perpetual inventory master files. client convenience. audit staff availability.arrow_forwardYou have performed preliminary analytical procedures on one of your audit engagements and observed the following independent situations: The allowance for obsolete inventory increased from the prior year, but the allowance as a percentage of inventory decreased from the prior year. Long-term debt increased from the prior year, but total interest expense decreased as a percentage of long-term debt. The dollar amount of operating income is consistent with the prior year although the entity was more profitable on a net income basis. The quick ratio decreased from the prior year, although the amount of cash and net accounts receivable is almost the same as the prior year. Required: Below are possible explanations for each of the observed changes in the financial statement amounts and ratios. For each observed change, select the most likely explanation(s) from the list below. Note: There may be more than one explanation for a given observed change, and an explanation…arrow_forwardThe following general ledger accounts are included in the trialbalance for an audit client, Jones Wholesale Stationery Store.Accounts payableAccounts receivableAccrued interest expenseAccrued sales salariesAccumulated depreciation—furniture and equipmentAdvertising expenseAllowance for doubtful accountsBad debt expenseCashCommon stockDepreciation expense—furniture and equipmentFurniture and equipmentIncome tax expenseIncome tax payableInsurance expenseInterest expenseInventoryLoans payableNotes payableNotes receivable—tradePrepaid insuranceProperty tax expenseProperty tax payablePurchasesRent expenseRetained earningsSalaries, office and generalSalesSales salaries expenseTelecommunicationsexpensea. Identify the accounts in the trial balance that are likely to be included in each transaction cycle. Some accounts will be included in more than one cycle. Use the formatthat follows.Cycle Balance Sheet Accounts Income Statement AccountsSales and collectionAcquisition and paymentPayroll and…arrow_forward
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