Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 21, Problem 21DQP
a.
To determine
Provide three examples of inventories where specialist could be used by an auditor. Also, explain the manner in which work of the specialist could be used in each example.
b.
To determine
Explain the characteristics that might be considered by an auditor to ensure that the specialist is qualified.
c.
To determine
Explain the level of understanding that an auditor might require having in respect of the work performed by the specialist.
d.
To determine
Explain whether or not specialist should be independent of the client and the auditor.
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Students have asked these similar questions
The primary reason why auditors observe client's physical inventory is to make sure the amount of inventory reported in the Statement of Financial Position actually exists and fully owned by the company.a. Explain various audit procedures that should be performed by auditor to determine the slow-moving or obsolete items included in the inventory count. What is the important of attendance of the auditors during the physical inventory count?
When auditing inventories, an auditor would least likely verify thata. All inventory owned by the client is on hand at the time of the count.b. The client has used proper inventory pricing.c. The financial statement presentation of inventories is appropriate.d. Damaged goods and obsolete items have been properly accounted for.
An auditor often tries to acquire background knowledge of theclient’s industry as an aid to audit work. How does the acquisition of this knowledge aidthe auditor in distinguishing between obsolete and current inventory?
Chapter 21 Solutions
Auditing And Assurance Services
Ch. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQ
Ch. 21 - Prob. 11RQCh. 21 - Each employee of the Gedding Manufacturing Co., a...Ch. 21 - Prob. 13.1MCQCh. 21 - Prob. 13.2MCQCh. 21 - Prob. 13.3MCQCh. 21 - Prob. 14.1MCQCh. 21 - Prob. 14.2MCQCh. 21 - Prob. 14.3MCQCh. 21 - Prob. 15.1MCQCh. 21 - Prob. 15.2MCQCh. 21 - Prob. 15.3MCQCh. 21 - Prob. 16DQPCh. 21 - Prob. 17DQPCh. 21 - Prob. 18DQPCh. 21 - Prob. 19DQPCh. 21 - Prob. 20DQPCh. 21 - Prob. 21DQPCh. 21 - Prob. 22DQPCh. 21 - Prob. 23DQPCh. 21 - Prob. 24DQPCh. 21 - Prob. 25DQPCh. 21 - Prob. 26DQPCh. 21 - Prob. 27DQPCh. 21 - Prob. 28DQPCh. 21 - Prob. 29DQPCh. 21 - Prob. 30C
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Similar questions
- When a company's financial statements are audited, the principal element an auditor reviews is the reliability of the financial statement assertions. Which of the following audit objectives relate primarily to the financial report assertion of accuracy, valuation and allocation? Select one:a. Inventory listings are accurately compiled and the totals are properly included in the inventory accounts.b. Inventory quantities include all products, materials and supplies owned by the company that are in transit.c. Inventories exclude items billed to customers or owned by others. d. None of the abovearrow_forwardwhen the auditor Watch employees count inventory to determine whether company procedures are being followed. What type of evidence he or she is obtaining : Select one: a. observation b. inspection c. confirmation d. assurance e. inquiryarrow_forwardBy conducting which of the following steps, the auditor can obtain sufficient and appropriate audit evidence regarding existence of inventory, when the inventory is under the custody and control of third party and the auditor considers it material to the Financial statements a) Request confirmation from the third party b) Perform inspection if possible c) Auditor can take an expert advise d) Include it in the Auditors Opinion a) , b) and c) only Only d) Both a) and b) Only a) Only b)arrow_forward
- An auditor is examining a nonpublic company’s inventory procurement system and has decided to perform tests of controls. Under which of the following conditions do GAAS require tests of controls be performed by an auditor?a. Significant weaknesses were found in the company’s internal control.b. The auditor hopes to reduce the amount of work to be done in assessing inherent risk.c. The auditor believes that testing the controls could lead to a reduction in overall audit time and cost.d. Tests of controls are always performed when the auditor begins to assess control risk.arrow_forwardIn an audit of inventories, an auditor would most likely verify that: a. All inventory owned by the client is on hand at the time of the count. b. The client has used proper inventory pricing to reflect fair market value. c. The financial statement presentation of inventories is appropriate. d. Damaged goods and obsolete items have been recorded at historical cost. e. Goods-in-Transit, shipped to the client F.O.B. destination, are properly included in inventory.arrow_forwardBy conducting which steps, the auditor can obtain sufficient and appropriate audit evidence regarding existence of inventory, when the inventory is under the custody and control of third party and the auditor considers it material to the Financial statements a) Request confirmation from the third party b) Perform inspection if possible c) Auditor can take an expert advise d) Include it in the Auditors Opinion Only d) Both a) and b) Only a) Only b) a) , b) and c) onlyarrow_forward
- 1. What is the primary reason we perform physical inventory observations? A. To obtain sufficient appropriate audit evidence over the existence and condition of inventory to meet the objectives of the professional auditing standards B. To obtain sufficient appropriate audit evidence that inventory is recorded at the correct cost on the financial statements C. To provide assurance over the time it takes inventory to leave the warehouse and arrive at the customer D. To verify assumptions used in management's estimates regarding inventory reserves 2. What piece of information gained during the understanding of the inventory process would be LEAST relevant to the scoping of inventory locations? A. The company hired a new count supervisor for one of their largest locations B. Book to physical adjustments were material in the prior year for 2 locations C. Cycle count accuracy rates have been greater than management's targets in the prior year and current year to date D. WIP inventory takes…arrow_forwardA major objective of written representations is toa. Shift responsibility for financial statements from the management to auditors.b. Provide a substitute source of audit evidence for substantive procedures that auditors would otherwise perform.c. Provide management an opportunity to make assertions about the quantity and valuation of the physical inventory.d. Impress on management its ultimate responsibility for the financial statements and disclosures.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_forward
- Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?a. The entity has rights to the inventory.b. Inventory is properly valued.c. Inventory is properly presented in the financial statements.d. Inventory is completearrow_forwardWhen planning an audit, which of the following is not a factor that affects auditors’ decisions about the quantity, type, and content of audit documentation?a. The auditors’ need to document compliance with generally accepted auditing standards.b. The auditors’ need to verify the existence of new sales contracts important for the client’sbusiness.c. The auditors’ judgment about their independence with regard to the client.d. The auditors’ judgments about materiality.arrow_forward
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