EBK INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946465
Author: SANNELLA
Publisher: VST
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Chapter 2, Problem 2.3E
To determine
The type of enhancing characteristics and their components associated with the given accounting scenarios.
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.......................represents an opportunity of the auditor to observe operations and to assess physical safeguards over assets and interpret accounting data related to assets .
1. Reliance on the specialist's report
2.Reading the minutes of meeting of Board of Directors of the client
3. Discussion with management
4. Tour of the client's facilities
Which type of audit is an investigation into whether or not the use of resources is economic, efficient and effective?
a.
Forensic Audit
b.
Public Sector Audit
c.
Value for Money Audit
d.
Environmental Audit
An example of an analytical procedure is the comparison of
Results of a statistical sample with the expected characteristics of the actual population.
O Computer generated data with similar data generated by a manual accounting system.
Recorded amounts of major disbursements with appropriate invoices.
O Financial information with similar information regarding the industry in which the entity operates.
Chapter 2 Solutions
EBK INTERMEDIATE ACCOUNTING
Ch. 2 - Prob. 2.1QCh. 2 - Why is a conceptual framework of accounting...Ch. 2 - Prob. 2.3QCh. 2 - Prob. 2.4QCh. 2 - Prob. 2.5QCh. 2 - Prob. 2.6QCh. 2 - What is predictive value?Ch. 2 - Prob. 2.8QCh. 2 - When is financial information considered...Ch. 2 - Prob. 2.10Q
Ch. 2 - Prob. 2.11QCh. 2 - Prob. 2.12QCh. 2 - What is the recognition principle and when is an...Ch. 2 - What is the revenue recognition principle and when...Ch. 2 - Prob. 2.15QCh. 2 - When are expenses recognized under IFRS?Ch. 2 - How are transactions recorded under accrual...Ch. 2 - Prob. 2.18QCh. 2 - Prob. 2.19QCh. 2 - Prob. 2.20QCh. 2 - Prob. 2.21QCh. 2 - Prob. 2.22QCh. 2 - Prob. 2.23QCh. 2 - Prob. 2.1BECh. 2 - Prob. 2.2BECh. 2 - Objective of Financial Reporting. Explain the...Ch. 2 - Prob. 2.4BECh. 2 - Fundamental and Enhancing Characteristics....Ch. 2 - Prob. 2.6BECh. 2 - Prob. 2.7BECh. 2 - Prob. 2.8BECh. 2 - Fundamental and Enhancing Characteristics....Ch. 2 - Faithful Representation. Match the component of a...Ch. 2 - Prob. 2.11BECh. 2 - Prob. 2.12BECh. 2 - Expense Recognition. Discuss the three main...Ch. 2 - Element Definitions. Identify whether the...Ch. 2 - Prob. 2.15BECh. 2 - Element Definitions, U.S. GAAP, IFRS. Identify...Ch. 2 - Prob. 2.17BECh. 2 - Measurement Bases. Match the measurement basis...Ch. 2 - Cash versus Accrual Bases of Accounting. The...Ch. 2 - Prob. 2.20BECh. 2 - Prob. 2.21BECh. 2 - Assumptions in Financial Reporting. Indicate the...Ch. 2 - Conceptual Framework. Noeleen Auto Mall, Ltd....Ch. 2 - Qualitative Characteristics. Referring to the...Ch. 2 - Prob. 2.3ECh. 2 - Prob. 2.4ECh. 2 - Terms and Concepts. Complete the following...Ch. 2 - Prob. 2.6ECh. 2 - Cash versus Accrual Bases of Accounting. Top Notch...Ch. 2 - Cash vs. Accrual. you are provided the following...
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Similar questions
- An important task ¡n the audit of the revenue cycle is determining whether a client has appropriately recognized revenue. a. What is the five-step process that companies should use in recognizing revenue? Why might the auditor need to do additional research and consider additional criteria on revenue recognition? b. The following are situations in which the auditor will make decisions about the amount of revenue to be recognized. For each of the following scenarios, labeled (1) through (6): . Identify the key issues to address in determining whether or not revenue should he recognized. . Identify additional information the auditor may want to gather in making a decision on revenue recognition. . Based only on the information presented, develop a rationale for either the recognition or nonrecognition of revenue. 1. AOL sells software that is unique as a provider of Internet services. The software contract includes a service fee of $19.95 for up to 500 hours of Internet service each month. The minimum requirement is a one-year contract. The company proposes to immediately recognize 30% of the first-year’s contract as revenue from the sale of software and 70% as Internet services on a monthly basis as fees are collected from the customer. 2. Modis Manufacturing builds specialty packaging machinery for other manufacturers. All of the products are high end and range in sales price from $5 million to $25 million. A major customer is rebuilding one of its factories and has ordered three machines with total revenue for Modis of $45 million. The contracted date to complete the production was November, and the company met the contract dare. The customer acknowledges the contract and confirms the amount. However, because the factory is not yet complete, it has asked Modis to hold the products in the ware house as a courtesy until its building is complete. 3. Standish Stoneware has developed a new low-end line of baking products that will be sold directly to consumers and to low-end discount retailers. The company had previously sold high-end silverware products to specialty stores and has a track record of returned items for the high-end stores. The new products tend to have more defects, but the defects are not necessarily recognizable ¡n production. For example, they are more likely to crack when first used in baking. The company does not have a history of returns from these products, but because the products are new, it grants each customer the right to return the merchandise for a full refund or replacement within one year of purchase. 4. Omer Technologies is a high-growth company that sells electronic products to the custom copying business. It is an industry with high innovation, but Omer’s technology is basic. In order to achieve growth, management has empowered the sales staff to make special deals to increase sales in the fourth quarter of the year. The sales deals include a price break and an increased salesperson commission but not an extension of either the product warranty or the customer’s right to return the product. 5. Electric City is a new company that has the exclusive right to a new technology that saves municipalities a substantial amount of energy for large-scale lighting purposes (e.g., for ball fields, parking lots, and shop ping centers). The technology has been shown to be very cost effective in Europe. In order to get new customers to try the product, the sales force allows customers to try the product for up to six months to prove the amount of energy savings they will realize. The company is so confident that customers will buy the product that it allows this pilot-testing period. Revenue is recognized at the time the product is installed at the customer location, with a small provision made for potential returns. 6. Jackson Products decided to quit manufacturing a line of its products and outsourced the production. However, much of its manufacturing equipment could be used by other companies. In addition, it had over $5 million of new manufacturing equipment on order in a noncancelable deal. The company decided to become a sales representative to sell the new equipment ordered and its existing equipment. All of the sales were recorded as revenue.arrow_forwardThe final outcome of an audit process is a/an _______________ a. Audit report b. Profit or loss c. Balance sheet d. Income and expensearrow_forwardCurrent Attempt in Progress Your answer is partially correct. A company found itself with access to the following types of data. • Human resources data. • Lender and shareholder data. • Customer service data. • Industry reports. Classify each type of data in terms of its source, internal or external, and also in terms of its format, structured or unstructured. For any of the above sources that were identified as unstructured, describe a specific example of data within that source that could be unstructured. Format Specific example Structured and Unstructured Employee Personnel Records Data Type Human resources data Source Internal Lenders and shareholder data External ✓ Structured Customer service Internal Audio Recordings of Phone Calls Structured and Instructured Audio Recordings of Customer Phone Callearrow_forward
- Spreadsheet software would be most useful for which of the following audit activities?a. Testing internal controls over computerized accounting applications.b. Preparing an audit plan.c. Preparing a comparison of current-year expenses with those from the previous year.d. Drafting a planning memorandum.arrow_forward1. This is the evaluation of activities, systems, and controls within an enterprise for efficiency, effectiveness, and economy. * a Financial audit b. Compilation review c. Compliance audit d. Operations audit 2. The objectives of an operations audit are established based on the following, except: * a. the scope and potential risks. b. characteristics of products, processes, projects, and any changes to them. d. management systems, contractual, and legal requirements management goals and priorities 3.These performance measures draw attention to unfairness of potential social irresponsibility in terms of corporate policy and practice. * a. Efficiency performance measures b. Economy performance measures c. Effectiveness performance measures d. Equity performance measures 4. One of the activities of management to promote operations audit of efficiency is project and…arrow_forwardWhich of the following sets of application characteristics of an accounting application might influence the selection of data entry devices and media for a computerized accounting system?a. Timing of feedback needs relative to input, need for documentation of an activity, and the necessity for reliability and accuracy.b. Cost considerations, volume of input, complexity of activity, and liquidity of assets involved. c. Need for documentation, necessity for accuracy and reliability, volume of output, and cost considerations. d. Relevancy of data, volume of input, cost considerations, volume of output, and timing of feedback needs relative to input. e. Type of file used, reliability of manufacturer’s service, volume of output, and cost considerations.arrow_forward
- Performance audits usually include [two answers]a. Financial audits.b. Economy and efficiency audits.c. Compliance audits.d. Program auditsarrow_forwardA review of how an organization’s management and its operating procedures are functioning with respect to their effectiveness and efficiency in meeting stated objectives. a. External Audit b. Operational Audit c. Cash Audit d. Internal Auditarrow_forwardProfessional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements. a. Identify the activities that affect the revenue cycle. b. Identify the financial statement accounts typically associated with the revenue cycle.arrow_forward
- Companies need to report both monetary and nonmonetary data and information. A. Define these two terms and provide examples of each. B. Discuss what sources are available that provide companies with both types of data and information.arrow_forwardActivities carried out by the auditor using comparisons and relationships of accounts or data to assess whether the said accounts or data make sense (appear reasonable) are ...a. analytical proceduresb. comparing the accountsc. vertical analysisd. relationship modelarrow_forwardA. Inspections of tangible assetsB. ConfirmationC. TracingD. VouchingE. InquiryF. External-internal evidenceG. Audit planH. Substantive procedures___ 1. Documentation prepared by independent parties and sent to the client.___ 2. Proceeding forward through the accounting and control system from the evidence to the financial statements.___ 3. Audit of details of transactions and balances.___ 4. Audit procedure that provides compelling evidence of existence.___ 5. Direct correspondence with independent parties.___ 6. A list of audit procedures.arrow_forward
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