Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 7, Problem 33DQP
a.
To determine
Find the appropriate term for the given
b.
To determine
Classify the type of evidence for the given audit procedures.
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Following are 10 audit procedures with words missing and a list ofseveral terms commonly used in audit procedures.Audit Procedures1. the unit selling price times quantity on the duplicate sales invoice andcompare the total to the amount on the duplicate sales invoice.2. whether the accounts receivable bookkeeper is prohibited from handlingcash.3. the ratio of cost of goods sold to sales and compare the ratio to previousyears.4. the sales journal and the total to the general ledger.5. the sales journal, looking for large and unusual transactions requiringinvestigation.6. of management whether all accounting employees are required to takeannual vacations.7. all marketable securities as of the balance sheet date to determine whetherthey equal the total on the client’s list.8. the balance in the bank account directly with the East State Bank.9. a sample of duplicate sales invoices to determine if the controller’s approval isincluded and each duplicate sales invoice to the sales journal for…
For each of the following audit procedures, state which type of evidence-gathering technique is being used: (1) inspection or (2) computation or (3) confirmation or (4) analytical procedures or (5) enquiries or (6) observation.
Agreeing the total of the accounts receivable subsidiary ledger to the accounts receivable general ledger
Discussing the adequacy of the allowance for doubtful debts with the credit manager.
Comparing the current year gross margin with the gross margin for the last four years.
Examining a new machine to ensure that this major acquisition was
Watching the client’s warehouse personnel count the raw materials
Performing test counts of the warehouse personnel’s count of the raw
Obtaining a letter from the client’s solicitor indicating that there were no lawsuits in progress against the
Tracing the prices used by the client’s billing program for pricing sales invoices to the client’s approved price
Sending a written request to the client’s customers requesting that…
Consider each situation independently and describe the audit opinion that should be given and explain why.
a) The client estimated its Provision for Bad Debts based on an average of actual bad debts over the past five years. The client has always used this accounting policy when estimating this provision. The auditorconsidered the amount to be a reasonable one. The client has also properly accounted for and disclosed it in the financial statements.
b) The client (a large department store) used the Last In First Out (LIFO) method to determine the cost of its closing stock. The IFRS’s does not allow the use of LIFO in accounting for inventory. The client is notwilling to change this accounting policy.
c) In rare circumstances e.g. when the client is not a going concern, in order to give a true and fair view, management may prepare financial statements on a basis other than going concern basis. The client which is no longer a going concern has still prepared the financial statements on…
Chapter 7 Solutions
Auditing And Assurance Services
Ch. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Prob. 10RQ
Ch. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Prob. 13RQCh. 7 - Prob. 14RQCh. 7 - Prob. 15RQCh. 7 - Prob. 16RQCh. 7 - Prob. 17RQCh. 7 - Prob. 18RQCh. 7 - Prob. 19RQCh. 7 - Prob. 20RQCh. 7 - Define what is meant by a tick mark. What is its...Ch. 7 - Prob. 22RQCh. 7 - Prob. 23.1MCQCh. 7 - Prob. 23.2MCQCh. 7 - Prob. 23.3MCQCh. 7 - Prob. 24.1MCQCh. 7 - Prob. 24.2MCQCh. 7 - Prob. 24.3MCQCh. 7 - Prob. 25.1MCQCh. 7 - Prob. 25.2MCQCh. 7 - Prob. 25.3MCQCh. 7 - Prob. 26.1MCQCh. 7 - Prob. 26.2MCQCh. 7 - Prob. 26.3MCQCh. 7 - Prob. 27DQPCh. 7 - Prob. 28DQPCh. 7 - Prob. 29DQPCh. 7 - Prob. 30DQPCh. 7 - Prob. 31DQPCh. 7 - Prob. 32DQPCh. 7 - Prob. 33DQPCh. 7 - Prob. 34DQPCh. 7 - Prob. 36DQPCh. 7 - Prob. 37DQPCh. 7 - Prob. 40DQP
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- 4) Consider each situation independently and describe the audit opinion that should be given and explain why.a) The client estimated its Provision for Bad Debts based on an average of actual bad debts over the past five years. The client has always used this accounting policy when estimating this provision. The auditor considered the amount to be a reasonable one. The client has also properly accounted for and disclosed it in the financial statements. b) The client (a large department store) used the Last In First Out (LIFO) method to determine the cost of its closing stock. The IFRS’s does not allow the use of LIFO in accounting for inventory. The client is not willing to change this accounting policy. c) In rare circumstances e.g. when the client is not a going concern, in order to give a true and fair view, management may prepare financial statements on a basis other than going concern basis. The client which is no longer a going concern has still prepared the financial statements…arrow_forwardA client has a separate sales group for its largest “preferred” customers, a select group of customers who normally make purchases in excess of $250,000 and often have accounts receivable balances in excess of $1 million. Which of the following audit procedures would the auditor most likely perform?a. Prepare a schedule of purchases and payments for these customers.b. Send out negative confirmations on a large sample of these customers.c. Inquire of the sales manager regarding the accounts receivable terms.d. Send out positive confirmations on a large sample of these customers.arrow_forwardWhich of the following would provide an auditor with the most reliable evidence reguarding the existence of accounts receivable? A. A copy of the invoice sent to the customer. B. Acopy of the customer's sales order held by the client. C. An accounts receivable confirmation received by the auditor from the client's customer. D. An aging schedule showing the composition of the year-end-accounts receivable balance.arrow_forward
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