Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 18, Problem 7DQP
a.
To determine
Indicate the type of audit evidence used.
b.
To determine
Indicate balance related audit objective for each procedure.
c.
To determine
Indicate the need to have certain objectives satisfied by more than one
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The auditors have determined that each of the following objectives will be a part of the audit of SSC Corporation. While several procedures will ordinarily address an audit objective, select the procedure most directly related to the audit objective. Each procedure may be used once, more than once, or not at all.
1.
All receivables that should be recorded are recorded as of year-end.
2.
Recorded receivables are at appropriate net realizable values.
3.
Recorded receivables exist.
4.
The client has rights to recorded year-end receivables.
5.
The presentation and disclosure of receivables are adequate.
Trace a sample of sales invoiced from late in December to the sales journal and to postings in accounts receivable and sales amounts.
Review the aged trial balance for significant past due accounts.
Review board of director minutes and underlying contracts and sales terms with customers.
Vouch year-end accounts…
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…
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.
Chapter 18 Solutions
Auditing And Assurance Services
Ch. 18 - List five asset accounts, three liability...Ch. 18 - Prob. 2DQPCh. 18 - Prob. 3DQPCh. 18 - Prob. 4DQPCh. 18 - Prob. 5DQPCh. 18 - Prob. 6DQPCh. 18 - Prob. 7DQPCh. 18 - Prob. 8DQPCh. 18 - Prob. 9DQPCh. 18 - Prob. 10DQP
Ch. 18 - Prob. 11DQPCh. 18 - Prob. 13DQPCh. 18 - Prob. 14DQPCh. 18 - Prob. 15DQPCh. 18 - Prob. 16.1MCQCh. 18 - Prob. 16.2MCQCh. 18 - Prob. 16.3MCQCh. 18 - Prob. 17.1MCQCh. 18 - Prob. 17.2MCQCh. 18 - Prob. 17.3MCQCh. 18 - Prob. 18.1MCQCh. 18 - Prob. 18.2MCQCh. 18 - Prob. 18.3MCQCh. 18 - Prob. 19DQPCh. 18 - Prob. 20DQPCh. 18 - Prob. 21DQPCh. 18 - Prob. 22DQPCh. 18 - The following misstatements are included in the...Ch. 18 - Prob. 24DQPCh. 18 - Prob. 25DQPCh. 18 - Prob. 26DQPCh. 18 - Prob. 27DQPCh. 18 - Prob. 28DQPCh. 18 - Prob. 30C
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- 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_forwardIn the audit of notes payable, which balance-related audit objective is generally oneof the most important for the auditor to verify?(1) Notes payable reflected on the balance sheet at the end of the year exist.(2) Notes payable due to related parties are properly reflected on the balance sheet.(3) Existing notes payable are included on the balance sheet as of year end.(4) Notes payable are reflected at net realizable value as of the balance sheet datearrow_forwardAn auditor is likely to perform each of the below procedures to obtain evidence regarding the potential understatement of accounts payable at year-end (i.e., the Completeness assertion) except… Question options: Inspect purchase orders and receiving reports for accounts payable recorded at year-end. Inspect the open invoice file for invoices to be paid after year-end. All options describe procedures that can be used to identify a potential understatement of accounts payable. Analyze cash disbursements made during the first few weeks of the subsequent year and inspect supporting documentation for each disbursement.arrow_forward
- Which 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_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_forwardAudit Objectives and Procedures for Accounts Receivable. In the audit of accounts receivable, auditors develop specific audit assertions related to the receivables. They then design specific substantive procedures to obtain evidence about each of these assertions.Here is a selection of accounts receivable assertions:a. Accounts receivable represent all amounts owed to the client company at the balance sheet date.b. The client company has a legal right to all accounts receivable at the balance sheet date.c. Accounts receivable are stated at net realizable value.d. Accounts receivable are properly described and presented in the financial statements.Required:For each of these assertions, select the following audit procedure (numbered 1–7) that is best suited for the audit plan. Select only one procedure for each audit objective. A procedure may be selected once, not at all, or more than once.1. Analyze the relationship of accounts receivable and sales and compare with relationships for…arrow_forward
- Dodge, CPA, is auditing the financial statements of amanufacturing company with a significant amount of trade accounts receivable. Dodgeis satisfied that the accounts are correctly summarized and classified and that allocations,reclassifications, and valuations are made in accordance with GAAP. Dodge is planningto use accounts receivable confirmation requests to obtain sufficient appropriate evidenceas to trade accounts receivable.a. Identify and describe the two forms of accounts receivable confirmation requestsand indicate what factors Dodge will consider in determining when to use each.b. Assume that Dodge has received a satisfactory response to the confirmation requests.Describe how Dodge can evaluate collectibility of the trade accounts receivable.c. What are the implications to a CPA if during an audit of accounts receivable someof a client’s trade customers do not respond to a request for positive confirmation oftheir accounts?d. What auditing steps should a CPA perform if there…arrow_forwardWhen auditing the revenue and collection cycle, auditors normally select balances to confirm from thea. Sales journal.b. Accounts receivable listing.c. General ledger.d. Cash receipts listingarrow_forwardFor each of the procedures described in the table below, identify the audit procedure performed and classification of the audit procedure using the following: Audit Procedures: (1) Analytical procedure (2) Confirmation (3) Inquiry (4) Inspection of records or documents (5) Inspection of tangible assets (6) Observation (7) Recalculation (8) Reperformance Classification of Audit Procedure: (9) Substantive procedures (10) Test of controls Procedure Audit Procedure Classification of Audit Procedure a. Requested responses directly from customers as to amounts due. b. Compared total bad debts this year with the totals for the previous two years. c. Questioned management about likely total uncollectible accounts. d. Watched the accounting clerk record the daily deposit of cash receipts. e. Examined invoice to obtain evidence in support of the ending recorded balance of a customer. f. Compared a sample…arrow_forward
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