EP AUDITING+ASSURANCE...-MYACCT.LAB
16th Edition
ISBN: 9780134148656
Author: ARENS
Publisher: PEARSON CO
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Chapter 21, Problem 6RQ
To determine
Discuss the ways; the auditor could uncover the misstatement, assuming that there are no perpetual records.
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An auditor discovered the following errors and irregularities while performing tests of controls:
Inventory damaged by rain remains in inventory at full cost.
Required:
What control would have prevented or detected each of the aforementioned errors/irregularities?
What tests should the auditor perform to test each control?
To which financial statement assertion does the error or irregularity relate?
During the taking of physical inventory, the controller intentionally withheld several inventory tags from the employees responsible for the physical count. After the auditor left the client’s premises at the completion of the inventory observation, the controller recorded nonexistent inventory on the tags and thereby significantly over-stated earnings. How could the auditor have uncovered the misstatement, assuming that there are no perpetual records?
During the taking of physical inventory, the controller intentionallywithheld several inventory tags from the employees responsible for the physical count.After the auditor left the client’s premises at the completion of the inventory observation,the controller recorded nonexistent inventory on the tags and thereby significantly overstated earnings. How could the auditor have uncovered the misstatement, assuming thatthere are no perpetual records?
Chapter 21 Solutions
EP AUDITING+ASSURANCE...-MYACCT.LAB
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. 22DQPCh. 21 - Your client, Ridgewood Heating and Cooling,...Ch. 21 - Prob. 24DQPCh. 21 - Prob. 25DQPCh. 21 - Prob. 26DQPCh. 21 - Prob. 27DQPCh. 21 - Prob. 28DQPCh. 21 - Prob. 29DQP
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- An auditor discovered the following errors and irregularities while performing tests of controls: 1. Goods received on October 3 were never placed in the storeroom but instead were taken to the receiving clerk’s home. Required:a. What control would have prevented or detected each of the aforementioned errors/irregularities?b. What tests should the auditor perform to test each control?c. To which financial statement assertion does the error or irregularity relate?arrow_forwardAt the completion of an inventory observation, the controllerrequested the auditor to give him a copy of all recorded test counts to facilitate the correction of all discrepancies between the client’s and the auditor’s counts. Should the auditorcomply with the request? Why?arrow_forward1. A threat to the expenditure cycle that involves an employee creating and approving fictitious purchase orders is known as: A. Inventory theft B. Unauthorized access C. Check tampering D. Billing schemes 2. Purchase orders are used to initiate a payment in the disbursement cycle. True or False 3.Vendor audits are conducted to address the threat of unauthorized access in the disbursement cycle. True or falsearrow_forward
- Listed below are the management assertions that are contained in financial statements, financial statement misstatements, and concepts. For each of the below misstatements and concepts, select the appropriate assertion by management that is being violated. Replies may be used more than once. Misstatements & Concepts a. The client failed to include in their financial statements inventory that was consigned to others. b. The client had a significant amount of damaged goods that were presented at cost. C The client failed to describe in the financial statements significant debt restrictions. d. The client recorded receivables that were fictitious. e. The client recorded year-end sales in the subsequent year. f. The client included in their financial statements inventory that was on consignment from vendor. g. In directional testing, vouching from ledgers to source documents most directly addresses this assertion. h. In directional testing, tracing from source documents to journals most…arrow_forwardAnthony is asked to do an inventory count of a wide assortment of parts. Rather than taking the time to count, he guesses when he enters the quantity. Which, if any, ethical standards did Anthony violate? O Competence - failure to perform duties in accordance with laws and regulations. O Confidentiality - failure to inform all parties of confidential information O Integrity - failure to mitigate conflicts of interest O Credibility - failure to report any delays or deficiencies in information O Integrity - Contribute to a positive ethical culture O Credibility - failure to communicate information fairly and objectively.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
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