Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 22QRA
To determine
Explain which account would take more time to audit: accounts receivables or equipment.
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Which 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.
Which 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.
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Identify the primary audit objectives that auditors hope to accomplish by confirming a client's year-end accounts receivable. Explain the difference between "positive" and "negative" confirmation requests and discuss the quality of audit evidence yielded by each.
Chapter 13 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 13 - Prob. 1RQCh. 13 - K-J Corporation has current assets of 5 million...Ch. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Explain the use of a system of authorizations for...Ch. 13 - Moultrie Company discovered recently that a number...Ch. 13 - Does a failure to record the retirement of...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Gibson Manufacturing Company acquired new factory...Ch. 13 - Prob. 17RQCh. 13 - Do the auditors question the service lives adopted...Ch. 13 - Prob. 19RQCh. 13 - Explain how the existence of lease agreements may...Ch. 13 - Prob. 21RQCh. 13 - Prob. 22QRACh. 13 - Prob. 23QRACh. 13 - Gruen Corporation is a large diversified company...Ch. 13 - Prob. 25QRACh. 13 - Prob. 26QRACh. 13 - Prob. 27QRACh. 13 - Prob. 28QRACh. 13 - Prob. 29QRACh. 13 - Prob. 30QRACh. 13 - Prob. 31QRACh. 13 - To assure accountability for fixed-asset...Ch. 13 - Prob. 32BOQCh. 13 - Which of the following is an internal control...Ch. 13 - Which of the following accounts should be reviewed...Ch. 13 - Prob. 32EOQCh. 13 - Prob. 32FOQCh. 13 - Which of the following statements is not typical...Ch. 13 - Prob. 32HOQCh. 13 - Prob. 32IOQCh. 13 - An effective procedure for identifying unrecorded...Ch. 13 - Which of the following is not an overall test of...Ch. 13 - Prob. 32LOQCh. 13 - Prob. 33OQCh. 13 - Analysis of which account is least likely to...Ch. 13 - Prob. 34BOQCh. 13 - Prob. 34COQCh. 13 - Prob. 34DOQCh. 13 - A search for overstated property, plant, and...Ch. 13 - The following are typical questions that might...Ch. 13 - Prob. 36PCh. 13 - Prob. 37PCh. 13 - Chem-Lite, Inc., maintains its accounts on the...Ch. 13 - Prob. 39PCh. 13 - You are reviewing the property, plant, and...
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- Indicate whether you agree or disagree with the following statements and explain your reasoning. Teresa Dziuba was assigned to the Heathcliff Energy audit. She was ensuring that when recognizing revenues, all transactions and events that should have been recorded have been recorded. She was testing the existence assertion. Assume materiality for the financial statements as a whole is $200,000 and performance materiality for accounts receivable is set at $80,000. If the auditor finds one receivable that is overstated by $110,000, the auditor can ignore the error as it is less than $200,000 (overall materiality). Steve Slopak, the group partner was reviewing the work of Manny Fernandez on the Lake Shore Gold account. Manny asked Steve for an explanation on how audit risk_ould affect his work. Steve answered: “Audit risk affects the quantity and quality of evidence gathering."arrow_forwardThe auditors have determined that each of the following objectives will be a part of the audit of SSC Corporation. While several procedures will ordinarily address an audit objective, select the procedure most directly related to the audit objective. Each procedure may be used once, more than once, or not at all. 1. All receivables that should be recorded are recorded as of year-end. 2. Recorded receivables are at appropriate net realizable values. 3. Recorded receivables exist. 4. The client has rights to recorded year-end receivables. 5. The presentation and disclosure of receivables are adequate. Trace a sample of sales invoiced from late in December to the sales journal and to postings in accounts receivable and sales amounts. Review the aged trial balance for significant past due accounts. Review board of director minutes and underlying contracts and sales terms with customers. Vouch year-end accounts…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_forward
- When planning to perform an audit, an accountant must have a clear understanding of audit risk and its components. The existing audit risk components consist of: 1. Control Risk 2. Detection Risk 3. Inherent Risk For each of the following situations, determine the component of audit risk that exists and explain why. 1. The client failed to find fraud committed by his employees as early as possible because the client did not reconcile the bank balance every month. 2. The auditor's confirmation of accounts receivable failed to detect material misstatements in the sales and accounts receivable accounts. 3. Procedure for disbursement of money at the client which is carried out without the approval of the authorized officialarrow_forwardut of estion Send letters to a sample of accounts receivable customers to verify whether they have an outstanding balance at December 31, 2016. Choose the Audit Objective: Choose the specific audit objectivearrow_forwardThe practice of auditing firms to spread work throughout the year by carrying out as many auditing procedures as practicable before the balance sheet date, in order to minimize the load during the peak period. This is called a. Test of recorded transactions b. Confirmation of receivable and payablesc. Observation and test-check of inventoriesd. Interim workarrow_forward
- Identify the primary audit objectives that auditors hope to accomplish by confirming a client's year-end accounts receivable. Explain the difference between "positive" and "negative" confirmation requests and discuss the quality of audit evidence yielded by each.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_forwardYou are evaluating audit results for assets in the audit ofRoberts Manufacturing. You set the preliminary judgment about materiality at $50,000.The account balances, performance materiality, and estimated overstatements in theaccounts are shown next.Account Performance Estimate of TotalAccount Balance Materiality OverstatementsCash $ 50,000 $ 5,000 $ 1,000Accounts receivable 1,200,000 30,000 20,000Inventory 2,500,000 50,000 ?Other assets 250,000 15,000 12,000Total $4,000,000 $100,000 ? a. Assume you tested inventory amounts totaling $1,000,000 and found $10,000 inoverstatements. Ignoring sampling risk, what is your estimate of the total misstatement in inventory?b. Based on the audit of the assets accounts and ignoring other accounts, are the overallfinancial statements acceptable? Explain.c. What do you believe the auditor should do in the circumstances?arrow_forward
- You are conducting an audit and have obtained the following figures with respect to sales and accounts receivable: 2021 2020 Accounts receivable $ 3,760,000 $ 2,950,000 Allowance for doubtful accounts $ 217,000 $ 211,000 Sales $ 25,850,000 $ 23,700,000 Required: What are the audit implications of these figures? Identify key audit steps that you would perform for any of the above accounts.arrow_forwardThe following are 11 audit procedures taken from an auditprogram:1. Foot the accounts payable trial balance and compare the total with the general ledger.2. Confirm accounts payable balances directly with vendors.3. Account for a sequence of checks in the cash disbursements journal to determinewhether any have been omitted.4. Examine vendors’ invoices to verify the ending balance in accounts payable.5. Compare the balance in payroll tax expense with previous years. The comparisontakes the increase in payroll tax rates into account.6. Examine the internal auditor’s initials on monthly bank reconciliations as anindication of whether they have been reviewed.7. Examine vendors’ invoices and other documentation in support of recorded transactions in the acquisitions journal.8. Multiply the commission rate by total sales and compare the result with commissionexpense.9. Examine vendors’ invoices and other supporting documents to determine whetherlarge amounts in the repair and maintenance…arrow_forwardAssume that your audit partner has asked you to design detailed substantive testingprograms for the accounts receivable and sales; inventory; purchases and accountspayable; and payroll systems of Square Pharma. Your partner also asked you toincorporate all or some of the following types of tests: Specific analytical procedures,tests of detail (i.e. direct tests on balances and tests of transactions of a balance).While designing the testing programs, assume that the Tests of Control identifythe weaknesses as described in each of the following situations, but no other. Insummary:(a)Consider the control weaknesses for each subsystem as set out below; (b)Design and develop a substantive audit tests program using information fromlast three year annual reports and explain and justify your audit program in termsof audit objectives (also called 'audit assertions' )Note: The risk situations below are created for purposes of teaching and bear norelationship to events in Briscoe Group Ltd or any…arrow_forward
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