Concept explainers
a
Introduction:A substantive procedure is a process, to create conclusive evidence regarding audit assertions the completeness, existence, disclosure, rights, valuation of assets. Enough documentation must be collected to qualify as a substantive procedure.
To ascertain:The substantive
b
Introduction:A substantive procedure is a process, to create conclusive evidence regarding audit assertions the completeness, existence, disclosure, rights, valuation of assets. Enough documentation must be collected to qualify as a substantive procedure.
To ascertain:The substantive audit procedures should use during the audit to obtain the evidence.
c
Introduction:A substantive procedure is a process, to create conclusive evidence regarding audit assertions the completeness, existence, disclosure, rights, valuation of assets. Enough documentation must be collected to qualify as a substantive procedure.
To ascertain:The substantive audit procedures should use during the audit to obtain the evidence.
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- Ginnian and Fitch, a regional accounting firm, performs yearly audits on a number of different for-profit and not-for-profit entities. Two years ago, Luisa Mellina, Ginnians partner in charge of operations, became concerned about the amount of audit time required by not-for-profit entities. As a result, she instituted a series of training programs focusing on the auditing of not-forprofit entities. Now, she would like to see if the training seemed to work. So, she ran a multiple regression on 22 months of data for Ginnian for three variables: the total monthly cost of audit professional time, the number of not-for-profit audits, and the hours of training in the audit of not-for-profit entities. The following printout was obtained: Required: 1. Write out the cost equation for Ginnians audit professional time. 2. If Ginnian expects to have 9 audits of not-for-profits next month and expects that audit professionals will have a total of 130 hours of not-for-profit training, what is the anticipated cost of professional time? 3. Are the hours spent auditing not-for-profit entities positively or negatively correlated with audit professional costs? Is percentage of experienced team members positively or negatively correlated with audit professional cost? 4. What does R2 mean in this equation? Overall, what is your evaluation of the cost equation that was developed for the cost of audit professionals?arrow_forwardYou are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance. Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…arrow_forwardYou are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: 1) Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance. 2) Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…arrow_forward
- Sunny Best is the engagement partner for the financial report audit of BigMac Ltd for the year ended 31 December, 2021. The following material events or transactions have come to Sunny Best’s attention before he is scheduled to issue his report on 28 February, On 1 February, 2022, a plant owned by BigMac Ltd was damaged by a flood, resulting in an uninsured loss of inventory. For each of the above events or transactions, discuss audit procedures that should have brought the item to the auditor’s attention, and indicate the treatment required in the financial report. Give reasons for your decision.arrow_forwardYou are the supervisor accountable for the audit of Kicap Manis Berhad, a listed agency, for the 12 months ended 31 December 2019. The major enterprise activity of Kicap Manis Berhad is the manufacture of farm machinery. The audit paintings has been completed, and you are reviewing the operating papers in order to draft a file to those charged with governance. during the audit of property, plant and gadget (PPE), the audit team located no cloth misstatement but the subsequent issues have come to your interest. It changed into found that authorization had not been won for the buy of office equipment with a fee of RM315,000. The officer in rate of the buy claimed that the management has conveyed their settlement with the buy in the management team month-to-month meeting, but the audit team has now not been provided with such mins of assembly even after numerous requests. The purchaser is the use of an internally evolved PPE gadget, PropertyCare, to hold the records of the PPE. It became…arrow_forwardDuring your annual audit of Walker Distributing Company, your assistant, Jane Williams, reports to you that, although a number of entries were made during the year in the general ledger account Notes Payable to Officers, she decided that it was not necessary to audit the account because it had a zero balance at year-end. Required: Do you agree with your assistant’s decision? Discuss.arrow_forward
- Roland Company, a retail store, has utilized your services as independent auditor for several years. During the current year, the company opened a new store, and in the course of your annual audit, you verify the cost of the fixtures installed in the new store by examining purchase orders, invoices, and other documents. This audit brings to light an understated invoice nearly a year old in which a clerical error by the supplier, Western Showcase, Inc., caused the total of the invoice to read $28,893.62 when it should have read $82,893.62. The invoice was paid immediately upon receipt without any notice of the error, and subsequent statements and correspondence from Western Showcase, Inc., showed that the account with Roland Company had been paid in full. Assume that the amount in question is material in relation to the financial position of both companies. What action should you take in this situation?arrow_forwardRoland Company, a retail store, has utilized your services as independent auditor for several years. During the current year, the company opened a new store, and in the course of your annual audit, you verify the cost of the fixtures installed in the new store by examining purchase orders, invoices, and other documents. This audit brings to light an understated invoice nearly a year old in which a clerical error by the supplier, Western Showcase, Inc., caused the total of the invoice to read $28,893.62 when it should have read $82,893.62. The invoice was paid immediately upon receipt without any notice of the error, and subsequent statements and correspondence from Western Showcase, Inc., showed that the account with Roland Company had been paid in full. Assume that the amount in question is material in relation to the financial position of both companies. What action should you take in this situation? If the client should decline to take any action in the matter, would you insist…arrow_forwardRoland Company, a retail store, has utilized your services as independent auditor for several years. During the current year, the company opened a new store, and in the course of your annual audit, you verify the cost of the fixtures installed in the new store by examining purchase orders, invoices, and other documents. This audit brings to light an understated invoice nearly a year old in which a clerical error by the supplier, Western Showcase, Inc., caused the total of the invoice to read $28,893.62 when it should have read $82,893.62. The invoice was paid immediately upon receipt without any notice of the error, and subsequent statements and correspondence from Western Showcase, Inc., showed that the account with Roland Company had been paid in full. Assume that the amount in question is material in relation to the financial position of both companies. If the client should decline to take any action in the matter, would you insist that the unpaid amount of $54,000 be included in…arrow_forward
- Roland Company, a retail store, has utilized your services as independent auditor for several years. During the current year, the company opened a new store, and in the course of your annual audit, you verify the cost of the fixtures installed in the new store by examining purchase orders, invoices, and other documents. This audit brings to light an understated invoice nearly a year old in which a clerical error by the supplier, Western Showcase, Inc., caused the total of the invoice to read $28,893.62 when it should have read $82,893.62. The invoice was paid immediately upon receipt without any notice of the error, and subsequent statements and correspondence from Western Showcase, Inc., showed that the account with Roland Company had been paid in full. Assume that the amount in question is material in relation to the financial position of both companies. Assuming that you were later retained to make an audit of Western Showcase, Inc., would you utilize the information gained in…arrow_forwardAJ Kumar is completing the December 31, 2020, audit of Kiwi Company. As part of the final procedures, Kumar has requested representations from Kiwi’s management regarding their assertion as to the fairness of the financial statements and other important matters addressed by professional standards. Because Kiwi’s management is attending an analyst briefing in the upcoming week, Kumar receives these signed representations dated February 6, 2021. Kumar has a few remaining items to complete, does so, and dates the auditor’s report February 9, 2021. Describe the most appropriate course of action that the auditors should take.arrow_forwardSusan, CA, a practicing chartered accountant has been appointed as an internal auditor of Syarikat Maju Berhad. She conducted the physical verification of the inventory at the year-end and handed over the report of such verification to Muaz, CA, the statutory auditor of the Company, for his view and reporting Can Muaz CA, rely on such report?arrow_forward
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