Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 15RQ
To determine
Explain whether the use of a representation letter is an acceptable means of reducing the cost of an audit.
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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.
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?
Explain why you agree or disagree with the following statement:“In most audits, it is more important to test carefully the cutoff for sales than forcash receipts.” Describe how you perform each type of test, assuming documents areprenumbered.
Chapter 5 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Distinguish among routine, nonroutine, and...Ch. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - As part of the verification of accounts receivable...Ch. 5 - Prob. 9RQCh. 5 - When in the course of an audit might the auditors...
Ch. 5 - Prob. 11RQCh. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14RQCh. 5 - Prob. 15RQCh. 5 - Prob. 16RQCh. 5 - Prob. 17RQCh. 5 - Prob. 18RQCh. 5 - Prob. 19RQCh. 5 - What disclosures should be made in the financial...Ch. 5 - Prob. 21RQCh. 5 - Prob. 22RQCh. 5 - Prob. 23RQCh. 5 - Prob. 24RQCh. 5 - Prob. 25RQCh. 5 - Prob. 26RQCh. 5 - Prob. 27RQCh. 5 - Prob. 28RQCh. 5 - Prob. 29RQCh. 5 - Prob. 30RQCh. 5 - Prob. 31RQCh. 5 - I have finished my testing of footings of the cash...Ch. 5 - Prob. 33RQCh. 5 - Prob. 34RQCh. 5 - Financial statements contain a number of...Ch. 5 - Prob. 36QRACh. 5 - In an audit of financial statements, the auditors...Ch. 5 - Prob. 38QRACh. 5 - Prob. 39QRACh. 5 - Prob. 40QRACh. 5 - Prob. 41QRACh. 5 - Prob. 42QRACh. 5 - Prob. 43QRACh. 5 - Prob. 44QRACh. 5 - Prob. 45AOQCh. 5 - Prob. 45BOQCh. 5 - Prob. 45COQCh. 5 - Prob. 45DOQCh. 5 - Prob. 45EOQCh. 5 - Prob. 45FOQCh. 5 - Prob. 45GOQCh. 5 - Prob. 45HOQCh. 5 - Prob. 45IOQCh. 5 - Prob. 45JOQCh. 5 - Prob. 45KOQCh. 5 - A difference of opinion concerning accounting and...Ch. 5 - Prob. 46OQCh. 5 - Prob. 47OQCh. 5 - Prob. 48AOQCh. 5 - Prob. 48BOQCh. 5 - Prob. 48COQCh. 5 - The cost of analytical procedures in terms of time...Ch. 5 - Prob. 48EOQCh. 5 - Prob. 49OQCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56P
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- As a result of management's refusal to permit the auditor to physically examine inventory, theauditor must depart from the unmodified opinion audit report because A. the scope of the audit has been restricted B. the scope of the audit has been restricted by circumstances beyond either the client's orauditor's control. C. the financial statements have not been audited in accordance with GAAS D. the financial statements have not been prepared in accordance with GAAP.arrow_forwardMany auditors assert that certain audit tests can be significantlyreduced for clients with adequate perpetual records that include both unit and cost data.What are the most important tests of the perpetual records that the auditor must makebefore reducing assessed control risk? Assuming the perpetuals are determined to beaccurate, which tests can be reduced?arrow_forwardWhat is the primary purpose of analytical procedures performed during the planning stages of the audit? Please identify the warning signs that were revealed about the inventory balance during analytical procedures that were ignored by the auditors.arrow_forward
- In most audits of large entities, control risk assessment contributes to audit efficiency, whichmeans thata. The cost of substantive procedures will exceed the cost of control evaluation work.b. Auditors will be able to reduce the cost of substantive procedures by an amount morethan the control evaluation costs.c. The cost of control evaluation work will exceed the cost of substantive procedures.d. Auditors will be able to reduce the cost of substantive procedures by an amount less thanthe cost of tests of controlsarrow_forwardThe reliability of the audit evidence considers , EXCEPT A. Evidence obtained directly by the practitioner is more reliable than evidence obtained indirectly or by Inference B. The practitioner ordinarily obtains more assurance from consistent evidence obtained from different sources or of a different nature than from items of evidence considered individually C. Evidence provided by original documents is more reliable than evidence provided by photocopies or facsimiles D. The practitioner considers the relationship between the cost of obtaining evidence rather than the usefulness of the information obtainedarrow_forwardWhy do auditors consider inventory errors pervasive?arrow_forward
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