Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 12, Problem 33OQ
To determine
Mention “YES” or “NO” for the given statement.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A client maintains perpetual inventory records in quantities and in dollars. If the assessed control risk is high, an auditor would probablya. Apply gross profit tests to ascertain the reasonableness of the physical counts.b. Increase the extent of tests of controls relevant to the inventory cycle.c. Request the client to schedule the physical inventory count at the end of the year.d. Insist that the client perform physical counts of inventory items several times during the year.
Which of the following timing of inventory count is the best based on the auditor’s point of view when the control risk is assessed at maximum and when there is a high inherent risk for the client? A. Inventory count just after year-endB. Inventory count at year-endC. Inventory count just before year-endD. All of the following are equal and the auditor can choose oneE. Inventory count must be done before year-end, at year-end and after year-end
3)
Which of the following audit procedures is a test of control?
a.
Management providing written instruction to all employees and supervising the monthly inventory stocktake.
b.
Observing employee compliance with stocktake procedures.
c.
Picking a sample of goods received notes and ensuring the correct date is recorded in the purchase’s ledger.
d.
Estimating total sales for a specific product line for the year and comparing actual sales.
Chapter 12 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 12 - Prob. 1RQCh. 12 - Explain the significance of the purchase order to...Ch. 12 - What segregation of duties would you recommend to...Ch. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - When perpetual inventory records are maintained,...
Ch. 12 - What is meant by a bill and hold scheme?Ch. 12 - What charges and credits may be disclosed in the...Ch. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - A well-prepared balance sheet usually includes a...Ch. 12 - Darnell Equipment Company uses the LIFO method of...Ch. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 20RQCh. 12 - Prob. 21QRACh. 12 - Prob. 22QRACh. 12 - Prob. 23QRACh. 12 - Prob. 24QRACh. 12 - Prob. 25QRACh. 12 - Prob. 26QRACh. 12 - Prob. 27QRACh. 12 - Grandview Manufacturing Company employs standard...Ch. 12 - Prob. 29AOQCh. 12 - Prob. 29BOQCh. 12 - The document issued by a common carrier...Ch. 12 - Which of the following should be included as a...Ch. 12 - Prob. 29EOQCh. 12 - Prob. 29FOQCh. 12 - Instead of taking a physical inventory count on...Ch. 12 - Prob. 29HOQCh. 12 - Prob. 29IOQCh. 12 - Prob. 29JOQCh. 12 - Prob. 29KOQCh. 12 - Prob. 29LOQCh. 12 - Prob. 30OQCh. 12 - Adapted AICPA Task-Based Simulation For each of...Ch. 12 - Prob. 32OQCh. 12 - Prob. 33OQCh. 12 - Prob. 34AOQCh. 12 - Prob. 34BOQCh. 12 - Prob. 34COQCh. 12 - Prob. 34DOQCh. 12 - Prob. 34EOQCh. 12 - Prob. 35OQCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 41PCh. 12 - Prob. 42PCh. 12 - Prob. 43ITCCh. 12 - Prob. 44ECCh. 12 - Western Trading Company is a sole proprietorship...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- In conducting year-end inventory counts, your audit team is debating the impact of the client's right of return policy both on inventory valuation and revenue recognition. The assistant controller argues that there is no need to worry about the return policies since they have not changed in a while. The audit senior wants a more authoritative answer, given the recently issued standard on revenue recognition. You have been asked to conduct some research of the authoritative literature before she presses the point with the client. Instructions If your school has a subscription to the FASB Codification, log in and prepare responses to the following. Provide Codification references for your responses. a. What is the authoritative guidance for revenue recognition when right of return exists? b. When is this guidance important for a company? That is, for which of steps in the five-step revenue recognition model does right of return come into play? c. Does the FASB literature provide…arrow_forwardThe auditor generally decides whether the inventory count can be taken before year-end primarily on the basis of: audit efficiency. accuracy of the perpetual inventory master files. client convenience. audit staff availability.arrow_forwardYou are working as a summer intern for AAA Auditing, Inc. You have been asked to help resolve discrepancies noted in the audit for Dolfin Corporation, a retailer of specialty aquarium supplies.As a retail company, Dolfin Corporation uses the perpetual inventory system. To prepare for this assignment, you have been asked to review your knowledge of salesand purchase transactions by completing the following table.Consider the effect of each transaction on the three accounts listed, and identify which accounts are debited or credited. If not affected by the transaction, select "No Effect". Inventory Estimated Returns Inventory Cost of Goods Sold Purchase of merchandise for resale Debit Cash sale of merchandise Credit Customer returns Debit Yearly estimate for customer returns Freight paid for merchandise purchased FOB shipping point Debit Return of merchandise purchased for resale Credit Freight paid for sales with FOB destination No Effect Sale on…arrow_forward
- During the most recent year's audit of Pillco Corporation, the auditors have once again noted that inventory turnover is considerably slower than the industry average. Which of the following should the auditors consider doing to address this issue? O The auditors should consider issuing a qualified opinion on the client's inventory accounts in order to draw attention to this issue. O The auditors should consider making reference to this in the management representation letter, to ensure client management is appropriately aware of this issue. O The auditors should consider requesting the client formulate note disclosure in the financial statements, specifically addressing this issue. O None of these answer choices are correct.arrow_forwardYour firm is the auditor of APACK Potteries, which is a wholesaler of pottery products (eg cups, saucers, plates, mugs etc), and you are carrying out the audit for the year ended 30 April. You have been asked by the senior in charge of the audit to carry out checks on cut-off and to identify stock which may be worth less than cost and to check that it has been valued correctly. The company has a computerised inventory control system which records receiptsand dispatches of stock, current stock quantities and the age of the stock. You attend a count of all the stock at the year end. You are required: (a)To explain FIVE procedures you would perform to confirm that inventory, sales and purchases cut-off is accurate. (b)Define in detail the basis for valuing inventory in accordance with International Financial Reporting Standards.arrow_forwardYou are working as a summer intern for AAA Auditing. You have been asked to help resolve discrepancies noted in the audit for Dolfin Company, a retailer of specialty aquarium supplies. As a merchandising company, Dolfin Company uses the perpetual inventory system. To prepare for this assignment, you have been asked to review your knowledge of sales and purchase transactions by completing the following table. Consider the effect of each transaction on the three accounts listed, then use checkmarks to identify which accounts are debited or credited. If none of these accounts is affected by the transaction, check the “No Effect” box. Merchandise Inventory Estimated Returns Inventory Cost of Merchandise Sold No Effect Debit Credit Debit Credit Debit Credit Purchase of merchandise for resale Customer returns Customer payment on account Payment of service…arrow_forward
- Statistical Sampling Used to Estimate Inventory. ACE Corporation does not conduct acomplete annual physical count of purchased parts and supplies in its principal warehousebut uses statistical sampling to estimate the year-end inventory. ACE maintains a perpetualinventory record of parts and supplies. Management believes that statistical sampling ishighly effective in determining inventory values and is sufficiently reliable, making a physical count of each item of inventory unnecessary.Required:a. List at least 10 normal audit procedures that should be performed to verify physical quantities whenever a client conducts a periodic physical count of all or part of its inventory.(See Appendix Exhibit 9B.1 for procedures.)b. Identify the audit procedures you should use that change or are in addition to normalrequired audit procedures [in addition to those listed in your solution to part (a)] when aclient utilizes statistical sampling to determine inventory value and does not conduct a100…arrow_forwardAs the lead accountant for a small company, you notice that inventory purchases from a certain vendor have increased dramatically over the past few months, whereas purchases from all other vendors have decreased. You suspect that something may not be right and that there may be a fraudulent relationship between someone in your company and the vendor that is getting increased business. question: Which theft act investigative method would you use to investigate your suspicions? state evidences that you to support suspicions.arrow_forwardg on You are working on the testing of internal controls over price changes in the inventory system. You completed the controis testing to determine whether all price changes were approved by the senior accountant, by reference to master file change forms. In order to place reliance on this control, your audit supervisor has decided that the error rate in the population should be less than 1%. When you calculated your sample size, you used a confidence level of 90% and predicted an error rate of less than one percent. Based on these decisions, you examined 150 inventory price master file change forms. In your testing, you uncovered two deviations. Based on these results, you calculate that the actual error rate in the population could be as high as 2.33%. Required: A. What actions are available to you regarding your planned reliance on the master file change controls? B. What are the advantages and disadvantages of each action? C. How would you decide which action to take? To assist in…arrow_forward
- As part of your audit of a client's inventory balance, you created an expectation of what should be the inventory balance by using the gross profit method. The difference between your expectation using the gross profit method of estimating inventory as against the client reported balance is above audit materiality level for audit of inventory. What should you do next? a. Discuss with the management the implication of the significant difference and propose an adjusting journal entry accordingly.b. Extend audit procedures by doing further analytical procedures on the inventory balance.c. Extend audit procedures by doing test of details of the account balance.d. Issue a qualified opinion on the basis of a material misstatement in the client's inventory.e. None of the abovearrow_forwardDryden Company is an auto parts supplier. At the end of each month, the employee who maintains all of the inventory records takes a physical inventory of the firm’s stock. When discrepancies occur between the recorded inventory and the physical count, the employee changes the physical count to agree with the records.Required:1. What problems could arise as a result of Dryden Company’s inventory procedures?2. How could the internal control system be strengthened to eliminate the potential problems?arrow_forwardAs part of your annual audit plan, you will be conducting an audit of the Purchases-Payables cycle. And to effectively plan for the audit, you have to document your understanding of the said process using a flowchart. This is also part of your usual planning procedures which will be expected from you by your Audit Manager. As a result of your interviews, observations, understanding of the process’ policies and procedures; you were able to gather the following data: The requests to purchase materials or the Purchase Requisition (PR) are prepared by the Purchasing department which is confirmed by the inventory controllers. These are approved by authorized personnel based on the company’s Approval Matrix. After confirmation of the PR, Purchasing Department will prepare the Purchase Orders (PO). These POs do not undergo further approval as long as supported by approved by PRs. A copy of the PO is sent to the vendor and another copy of the same PO to the Receiving personnel. Another copy…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub