Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 14A, Problem 3P
To determine
Prepare an audit plan for the test of control over the acquisition cycle.
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Describe the steps that auditors use to test controls over sales and collections.
Please provide references if any.
What types of audit procedures are typically performed in testing operating effectiveness of controls over the revenue and collection cycle?
An audit strategy sets the direction, timing, and scope of an audit. Based on your audit knowledge, which of the following would be included in the audit strategy document?
Select one:a. A flowchart of the entity's internal control system.b. The decision as to the combination of substantive testing and tests of control that would be adopted.c. The number of sales transactions to be tested.d. The results of the interim testing of payroll.
Chapter 14A Solutions
Principles Of Auditing & Other Assurance Services
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- Auditors identify and assess the risk of material misstatement at these two levels Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Financial Statement level and Information Process Goals level b Financial statement level and Operations Process Goals level c Information Process Goals level and Operations process goals level d Financial Statement Level and Relevant Assertion Levelarrow_forwardList the transaction-related audit objectives for the audit of salestransactions. For each objective, state one internal control that the client can use toreduce the likelihood of misstatementsarrow_forwardWhat three types of authorizations are commonly used as internalcontrols for sales? For each authorization, state a substantive test that the auditor coulduse to verify whether the control was effective in preventing misstatements.arrow_forward
- A. Explain all things have to be taken care for checks and vouchers in internal auditB. Talk about the Features (or) Characteristics of the Interim Auditarrow_forwardTests of controls in a GAAS audit are required fora. Obtaining evidence about the financial statement assertions.b. Accomplishing control over the occurrence of recorded transactions.c. Applying analytical procedures to financial statement balances.d. Obtaining evidence about the operating effectiveness of client control activitiearrow_forwardAuditing Sales/Revenue Transactions When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor first needs to consider the elements of the control environment. To assist the auditor in assessing the level of control risk, the following tests of controls were designed to allow the auditor to determine if the company’s related controls were operating effectively in the revenue cycle. Determine which of the four management assertion(s) apply to each individual sales (revenue) control being discussed. Hint: many have more than one assertion. Management Assertions: Existence & Occurrence, Rights, Completeness, Valuation 4. Years ago, the company purchased a software package that was used by other companies in the same industry (it was not specially made software). It was sold by a leading software company known for its highly-rated products. Which management assertions apply to this control?arrow_forward
- Auditing Sales/Revenue Transactions When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor first needs to consider the elements of the control environment. To assist the auditor in assessing the level of control risk, the following tests of controls were designed to allow the auditor to determine if the company’s related controls were operating effectively in the revenue cycle. Determine which of the four management assertion(s) apply to each individual sales (revenue) control being discussed. Hint: many have more than one assertion. Management Assertions: Existence & Occurrence, Rights, Completeness, Valuation 5. The computer assigns a number to every sales invoice. Which management assertions apply to this control? 6. Input validation checks (application controls) are applied to every bill to ensure the accuracy of the billing process. Which management assertions apply to this control?…arrow_forward13. When the auditors obtain an understanding of internal control for the financing cycle documentation will frequently include a written description as well as a(n): Group of answer choices Decision table List of audit objectives Internal control questionnaire Summary of tests of controlsarrow_forwardAuditing Sales/Revenue Transactions When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor first needs to consider the elements of the control environment. To assist the auditor in assessing the level of control risk, the following tests of controls were designed to allow the auditor to determine if the company’s related controls were operating effectively in the revenue cycle. Determine which of the four management assertion(s) apply to each individual sales (revenue) control being discussed. Hint: many have more than one assertion. Management Assertions: Existence & Occurrence, Rights, Completeness, Valuation 8. Monthly statements are mailed to customers. Which management assertions apply to this control? 9. The computer assigns a number to every delivery receipt. Which management assertions apply to this control? 10. All sales returns are approved by the vice…arrow_forward
- Auditing Sales/Revenue Transactions When an auditor needs to obtain an understanding of the overall internal control of a company, the auditor first needs to consider the elements of the control environment. To assist the auditor in assessing the level of control risk, the following tests of controls were designed to allow the auditor to determine if the company’s related controls were operating effectively in the revenue cycle. Determine which of the four management assertion(s) apply to each individual sales (revenue) control being discussed. Hint: many have more than one assertion. Management Assertions: Existence & Occurrence, Rights, Completeness, Valuation 6. Input validation checks (application controls) are applied to every bill to ensure the accuracy of the billing process.Which management assertions apply to this control?arrow_forwardProfessional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements. a. Identify the activities that affect the revenue cycle. b. Identify the financial statement accounts typically associated with the revenue cycle.arrow_forward
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