Auditing And Assurance Services
Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
Question
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Chapter 7, Problem 32DQP

a.

To determine

List the six factors that determine the reliability of evidence.

b.

To determine

Identify whether the first or second type of evidence is more reliable.

c.

To determine

Identify the six factors that affects the reliability of the evidence.

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The following are nine situations, each containing two meansof accumulating evidence:1. Confirm receivables with consumers versus confirming accounts receivable withbusiness organizations.2. Physically examine 3-inch steel plates versus examining electronic parts.3. Examine duplicate sales invoices when several competent people are checking eachother’s work versus examining documents prepared by a competent person on aone-person staff.4. Physically examine inventory of parts for the number of units on hand versusexamining them for the likelihood of inventory being obsolete.5. Discuss the likelihood and amount of loss in a lawsuit against the client with client’sin-house legal counsel versus discussion with the CPA firm’s own legal counsel.6. Confirm the oil and gas reserves with a geologist specializing in oil and gas versusconfirming a bank balance.7. Confirm a bank balance versus examining the client’s bank statements.8. Physically count the client’s inventory held by an independent…
The following are five situations, each containing two means of accumulating evidence: 1. Confirm receivables with consumers versus confirming accounts receivable with business organizations. 2. Examine duplicate sales invoices when several competent people are checking each other’s work versus examining documents prepared by a competent person on a one-person staff. 3. Physically examine inventory of parts for the number of units on hand versus examining them for the likelihood of inventory being obsolete. 4. Confirm a bank balance versus examining the client’s bank statements. 5. Obtain a physical inventory count from the company president versus physically counting the client’s inventory. Required:a. Identify the factors (at least 5 factors) that determine the reliability of evidence. For each factor, give one example of evidence that is likely to be reliable. b. For each of the five situations, state whether the first or second type of evidence is more reliable. c. For each…
Precision Industries, Inc., is a manufacturer of electronic components. When a purchase order is received from a customer, a sales clerk prepares a serially numbered sales order and sends copies to the shipping and accounting departments. When the merchandise is shipped to the customer, the shipping department prepares a serially numbered shipping advice and sends a copy to the accounting department. Upon receipt of the appropriate documents, the accounting department records the sale in the accounting records. All shipments are FOB shipping point.   How can the auditors determine whether Precision Industries, Inc., has made a proper year-end cutoff of sales transactions?
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