Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN: 9781337619455
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: Cengage Learning
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Question
Chapter 10, Problem 19RQSC
To determine
Introduction: A Substantive procedure is a process or step performed by an auditor to collect sufficient and appropriate evidence regarding the completeness, accuracy, occurrence of a transaction or event.
Substantive
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Which of the following circumstances would most likely cause an audit team to performextended procedures?a. Supporting documents are produced when requested.b. The client made several large adjustments at or near year-end.c. The company has recently hired a new chief financial officer after the previous oneretired.d. The company maintains several different petty cash funds
An auditor suspects that a client's cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme, the auditor most likely would compare the
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Daily cash summaries with the sums of the cash receipts journal entries.
Individual bank deposit slips with the details of the monthly bank statements.
Dates checks are deposited per bank statements with the dates remittance credits are recorded.
Dates uncollectible accounts are authorized to be written off with the dates the write-offs are actually recorded.
Why is there a greater emphasis on the detection of fraudin tests of details of cash balances than for other balance sheet accounts? Give two specificexamples that demonstrate how this emphasis affects the auditor’s evidence accumulation in auditing year-end cash.
Chapter 10 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
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- Which of the following procedures will an auditor most likely perform for year-endaccounts receivable confirmations when the auditor did not receive replies to secondrequests?(1) Review the cash receipts journal for the month prior to year end.(2) Intensify the study of internal control concerning the revenue cycle.(3) Inspect the shipping records documenting the merchandise sold to the debtors.(4) Increase the assessed level of detection risk for the existence assertion.arrow_forwardWhich of the following is one of the better auditing techniques to detect kiting?(1) Review composition of authenticated deposit slips.(2) Review subsequent bank statements and cancelled checks received directlyfrom the banks.(3) Prepare year-end bank reconciliations.(4) Prepare a schedule of bank transfers from the client’s booksarrow_forwardIn your audit of Ginko Company, you have received a cash confirmation and a cutoff statement from the bank on Ginko’s one bank account. Prepare a list of substantive procedures for Ginko’s casharrow_forward
- As one of the year-end audit procedures, the auditor instructed the client's personnel to prepare a confirmation request for a bank account that had been closed during the year. After the client's treasurer has signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure? a. The confirmation request was signed by the treasurer. b. Sending the request was meaningless because the account was closed before the year end. c. The request was mailed by the assistant treasurer. d. The CPA did not sign the confirmation request before it was mailed.arrow_forwardWhich of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? A. Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices. B. Compare a sample of purchase orders issued just after year-end with the year-end accounts payable balance. C. Scan the cash disbursement entries recorded just before year end for indications of unusual transactions. D. Vouch a sample of accounts payable entries recorded just before year end to the unmatched receiving report file.arrow_forwardWhich of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? *A. Scan the cash disbursements entries recorded just before year end for indications of unusual transactions.B. Compare a sample of purchase orders issued just after year end with the year-end accounts payable trial balance.C. Obtain a copy of the receiving report until year end and its related sales invoice and trace them to the purchases journal.D. Compare the entries recorded in the purchases journal and the cash disbursements journal just before year end.arrow_forward
- When auditors perform the bank reconciliation test, what would be the appropriate audit procedure for the cash receipts reported on the bank statement but not on the company cash account? A. Auditors investigate whether those cash payments are recorded in the cash payment journal. B. Auditors investigate whether those cash receipts are recorded in the cash receipt journal. C. Auditors trace those cash receipt transactions to bank statements issued in subsequent periods to see if they appear in bank statements after the balance date. D. Unpresented cheques need to be traced to subsequent bank statements. E. All of the options are correct.arrow_forwardWhich of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? O Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. O Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions. O Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.arrow_forwardDuring the preparation of a bank reconciliation, the assistant controller discovered that the Bank incorrectly recorded a $3290 check as $329. The controller has decided not to notify the bank but wait for the bank to detect the error. The controller plans to record the $2961 error as "Other Income" if the Bank fails to detect the error within the next three months. Please discuss whether the controller is behaving in an ethical manner. How are cash equivalents reported in the financial statements? Please list two examples of cash equivalents.arrow_forward
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