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 15, Problem 36P
a.
To determine
Explain the financial statement assertion that is most likely to relate with the given confirmation.
b.
To determine
List the additional
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
The auditors join client stock take at
the year end and see whether the way
that they count is in the correct
procedures or not. This procedure is an
example of: *
Observation
Inquiry
Inspection of tangible assets
O Inspection of records and documents
The following audit procedures are commonly performedby auditors in the verification of owners’ equity:1. Review the articles of incorporation and bylaws for provisions about owners’ equity.2. Analyze all owners’ equity accounts for the year and document the nature of anyrecorded change in each account.3. Account for all certificate numbers in the capital stock book for all shares outstanding.4. Examine the stock certificate book for any stock that was cancelled.5. Review the minutes of the board of directors’ meetings for the year for approvalsrelated to owners’ equity.6. Recompute earnings per share.7. Review debt provisions and senior securities with respect to liquidation preferences,dividends in arrears, and restrictions on the payment of dividends or the issue of stock.a. State the purpose of each of these seven audit procedures.b. List the type of misstatements the auditors can uncover by the use of each auditprocedure.
The following audit procedures are commonly performed by auditors in the verification of owners’ equity:
1.Review articles of incorporation and bylaws for provisions about owners’ equity.
2.Analyze all owners’ equity accounts for the year and document the nature of any recorded change in each account.
3.Confirm capital stock transactions with the stock registrar and transfer agent.
4.Confirm shares issued and outstanding with the stock registrar and transfer agent.
5.Review the minutes of the board of directors’ meetings for the year for approvals related to owners’ equity.
6.Recompute earnings per share.
7.Review debt provisions and senior securities with respect to liquidation preferences, dividends in arrears, and restrictions on the payment of dividends or the issue of stock.
Required
State the purpose of each of these seven audit procedures.
List the type of misstatements the auditors can uncover by the use of each audit procedure.
Chapter 15 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 15 - What does the trust indenture used by a...Ch. 15 - Long-term creditors often insist upon placing...Ch. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Mansfield Corporation has outstanding an issue of...Ch. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - What do you consider to be the most important...Ch. 15 - What is the primary responsibility of an...Ch. 15 - In the audit of a small corporation that issues...Ch. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Corporations sometimes issue their own capital...Ch. 15 - Prob. 21RQCh. 15 - Prob. 22RQCh. 15 - Prob. 23RQCh. 15 - Prob. 24RQCh. 15 - Prob. 25RQCh. 15 - Prob. 26RQCh. 15 - Prob. 27QRACh. 15 - Prob. 28QRACh. 15 - Prob. 29QRACh. 15 - You are retained by Columbia Corporation to audit...Ch. 15 - Prob. 31QRACh. 15 - Prob. 32AOQCh. 15 - Prob. 32BOQCh. 15 - Prob. 32COQCh. 15 - Prob. 32DOQCh. 15 - Prob. 32EOQCh. 15 - When a client uses paper stock certificates, an...Ch. 15 - Prob. 32GOQCh. 15 - The auditors can best verify a clients bond...Ch. 15 - Prob. 32IOQCh. 15 - All corporate capital stock transactions should...Ch. 15 - Prob. 32KOQCh. 15 - Prob. 32LOQCh. 15 - Prob. 32MOQCh. 15 - Prob. 32NOQCh. 15 - Prob. 32OOQCh. 15 - An auditor most likely would inspect loan...Ch. 15 - Prob. 32QOQCh. 15 - Match the following definitions (or partial...Ch. 15 - Prob. 34PCh. 15 - Prob. 35PCh. 15 - Prob. 36PCh. 15 - Prob. 37P
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
- Which of the following is the most important audit consideration when examining the stockholders’ equity section of a client’s balance sheet?a. Changes in the capital stock account are verified by an independent stock transfer agent.b. Stock dividends and stock splits during the year under audit were approved by the stockholders.c. Stock dividends are capitalized at par or stated value on the dividend declaration date.d. Entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors.arrow_forwardThe auditor asked for the general information sheet of the company. Which of the following assertion is relevant when testing the valuation assertion? Group of answer choices The number of shares issued and outstanding The par value of each class of shares Date of incorporation Listing of top 20 shareholdersarrow_forwardWhich of the following audit procedures would be most relevant when examiningthe completeness transaction-related audit objective for capital stock?(1) The auditor examines minutes of the board of directors’ meetings to identifyany actions involving the issuance of capital stock.(2) The auditor vouches entries in the client’s capital stock records to board minutes.(3) Confirmations of new stock issuances are sent to the client’s stock transfer agent.(4) The auditor traces entries of new stock issuances to the cash receipts journal.arrow_forward
- Describe the audit procedures you would use to learn about each of the situations listed. Begin by identifying all of the audit procedures you would use to learn about situation 1. (Select the 4 choices that apply.) A.Analyze legal expense for the period under audit and review invoices and statements of legal counsel for indications of contingent liabilities. B.Review records for unusual journal entries made to the equity accounts (Common stock and Retained earnings) subsequent to year-end. C.Discuss, specifically, any related party transactions with management and include information in letter of representation. D.Obtain letters from all major attorneys performing legal services for the client as to the status of pending litigation or other contingent liabilities. E.Confirm details of stock transactions with registrar and transfer agent. F.Review financial statements of affiliate, and where related party transactions are apparent, make direct…arrow_forwardJones was engaged to examine the financial statements of Gamma Corporation for the year ended June 30. Having completed an examination of the investment securities, which of the following is the best method of verifying the accuracy of recorded dividend income?a. Tracing recorded dividend income to cash receipts records and validated deposit slips.b. Performing analytical procedures and statistical sampling.c. Comparing recorded dividends with amounts appearing on federal information Form 1099.d. Comparing recorded dividends with a standard financial reporting service’s record of dividends.arrow_forwardFor a publicly owned company, indicate which of the fol-lowing accounting activities are likely to occur at or shortly after year-end. (More than one answer may be correct.)a. Preparation of income tax returns.b. Adjusting and closing of the accounts.c. Drafting of disclosures that accompany the fi nancialstatements.d. An audit of the fi nancial statements by an independentCPA fi rm.arrow_forward
- Wilson's Corporation is one of your new audit clients. The corporation's accountant is incertain how to report earnings per share in accordance with IFRS and is requesting that you provide the following information. Define the term 'earnings per share' as it applies to a corporation with a capitalization structure composed of only one class of ordinary shares. Explain how earnings per share should be computed and how the information should be disclosed in the corporation's financial statements.arrow_forwardChoose the correct. What is a registration statement?a. A statement that must be filed with the SEC before a company can begin an initial offering of securities to the public.b. A required filing with the SEC before a large amount of stock can be obtained by an inside party.c. An annual filing made with the SEC.d. A filing made by a company with the SEC to indicate that a significant change has occurred.arrow_forwardThe fieldwork for the December 31, 2018 audit of Schmidt Corporation ended on March 17, 2019. The financialstatements and auditor's report were issued on March 29, 2019. In each of the material situations (1 through 5)below, indicate the appropriate action (a, b, c). The possible actions are as followsa. Adjust the December 31, 2018 financial statements.b. Disclose the information in a footnote in the December 31, 2018 financial statements.c. No action is required.The situations are as follows:________ 1. On March 1, 2019, one of Schmidt Corporation's major customers declared bankruptcy. The customer'sfinancial condition in 2018 was deteriorating and they owed Schmidt Corporation a large sum of money as of thebalance sheet date.________ 2. On February 17, 2019, Schmidt Corporation sold some machinery for its book value.________ 3. On February 20, 2019 a flood destroyed the entire uninsured inventory in one of Schmidt'swarehouses.________ 4. On January 5, 2019, there was a significant…arrow_forward
- Review the following independent auditors’ report: To the Board of Directors and Shareholders Company XYZ "We have audited the accompanying balance sheets of XYZ Company as of December 31,2020, 2019 and 2018, and the related statements of income, retained earnings, and cash flowsfor the years then ended. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements basedon our audits. We conducted our audits in accordance with auditing standards generallyaccepted in the Caribbean. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of materialmisstatement.An audit includes examining, on test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall…arrow_forwardIn line with your audit with DAVE, Inc. financial statements, the company accountantpresented to you the balance sheet that follows. You reviewed the client’s accountingrecords and books based thereon. You discovered that books of accounts are inagreement in the said balance sheet as presented below: DAVE, INC.STATEMENT OF FINANCIAL POSITIONDecember 31, 2021 ASSETS LIABILITIES AND OWNERS EQUITYCash P 80,000 Accounts Payable P 32,000Accounts Receivable 160,000 Notes Payable 64,000Notes Receivable 48,000 Capital Stock 160,000Inventories 400,000 Retained Earnings 432,000Total P 688,000 Total P 688,000 Further review and investigation of the company’s books revealed the followingomissions and errors which were not corrected during the year of errors: 2018 2019…arrow_forwardSubsequent Event Below here were subsequent event that occurs in your client. Consider that all events were has material effect on client’s financial statement. The auditor is auditing financial statement for the year ended December 31, 2020 and is completing the audit in March 15, 2021.1) On January 12, 2021, auditor found that client made overstatement to their longlived asset account on 2020 year-end financial statement2) On January 31, 2021, client announced that they do stock split 2 for 1 for their entire common shares 3) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2021, and the cost was substantially different than was estimated4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 20205) On February 20, 2021, a major of…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 (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning