Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 16, Problem 28DQP
a.
To determine
Determine which procedures are tests of details of balances, which are tests of controls, and which are substantive tests of transactions.
b.
To determine
Identify which test of details of balances and test of controls or substantive test of transactions partially satisfy the balance-related objective.
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The following are specific balance-related audit objectives applied to the audit of accounts receivable (a. through i.) and management assertions about account balances (1 through 6). The list
referred to in the specific balance-related audit objectives is the list of the accounts receivable from each customer at the balance sheet date.
i (Click the icon to view the audit objectives.)
i (Click the icon to view the management assertions.)
Requirement
For each specific balance-related audit objective, identify the appropriate management assertion. (Hint: See table.)
Specific balance-related audit objective
There are no unrecorded receivables.
b. Uncollectible accounts have been provided for.
C. Receivables that have become uncollectible have been written off.
d.
All accounts on the list are expected to be collected within 1 year.
The total of the amounts on the accounts receivable listing agrees with the
general ledger balance for accounts receivable.
a.
e.
Management assertion
Which of the following audit procedures is aimed most directly at testing the completeness assertion for accounts payable?
Footing the list of accounts payable.
Tracing shipping reports after year-end to related customer purchase orders and invoices.
Examining underlying documentation for cash disbursements in the period after year-end.
Tracing shipping reports issued on or before year-end to related customer purchase orders and invoices.
Indicate whether each of the following audit procedures is a testof controls, a substantive test, or a dual-purpose test. Next, indicate the financial statement assertion most closely related to each audit procedure.
Required:a. Vouch recorded sales invoices to supporting shipping documents.b. Inspect recorded sales invoices for credit approval.c. Vouch recorded sales invoices prices to the approved price list.d. Send confirmations to all customers regarding accounts receivable.e. Recalculate the arithmetic accuracy of the recorded sales invoices.f. Compare the shipment date of recorded sales invoices with the invoice record date.g. Trace recorded sales invoices to posting in the general ledger control account and in the correct customer’s account.h. Select a sample of shipping documents from the shipping department file and trace shipments to recorded sales invoices.i. Scan recorded sales invoices and shipping documents for missing numbers in sequence.j. Vouch sales invoices and…
Chapter 16 Solutions
Auditing And Assurance Services
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Explain why you agree or disagree with the...Ch. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 10RQ
Ch. 16 - Prob. 11RQCh. 16 - Under what circumstances is it acceptable to...Ch. 16 - Prob. 13RQCh. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - Prob. 16RQCh. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Prob. 19RQCh. 16 - Prob. 20.1MCQCh. 16 - Prob. 20.2MCQCh. 16 - Prob. 20.3MCQCh. 16 - The following questions deal with confirmation of...Ch. 16 - Prob. 21.2MCQCh. 16 - Prob. 21.3MCQCh. 16 - Prob. 22.1MCQCh. 16 - Prob. 22.2MCQCh. 16 - Prob. 22.3MCQCh. 16 - Prob. 23.1MCQCh. 16 - Which of the following is least likely to be a...Ch. 16 - The following questions concern auditor...Ch. 16 - Prob. 24DQPCh. 16 - Prob. 25DQPCh. 16 - Prob. 26DQPCh. 16 - The following misstatements are sometimes found in...Ch. 16 - Prob. 28DQPCh. 16 - Prob. 29DQPCh. 16 - Prob. 30DQPCh. 16 - Prob. 31DQPCh. 16 - Prob. 32DQPCh. 16 - Prob. 33DQPCh. 16 - Prob. 34DQPCh. 16 - Prob. 35DQPCh. 16 - Prob. 36DQPCh. 16 - Prob. 38DQPCh. 16 - Prob. 39ICA
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- Audit tests include tests of controls and substantive procedures. Substantive procedures can be divided into substantive analytical procedures, tests of balances, tests of transactions and tests of disclosures.Required:For each test in the table below, select the type of audit test it represents. 1.Examine the financial report to determine whether all related party loans are properly presented2.Recalculate depreciation figure3.Trace sales recorded in the sales journal to shipping documents4.Examine sales invoices for initials to indicate that prices and extensions have been checked5.Check the cost of closing inventory to subsequent sales prices6.Confirm loan balances with financial institutionsarrow_forwardof stion For a sample of sales transactions selected from the sales journal, verify that the amount of the transaction has been recorded in the correct customer account in the accounts receivable subledger. Choose the Audit Objective: Choose the specific audit objective →arrow_forwardWhich of the following audit procedures is a dual-purpose test, which tests the effectiveness of internal controls as well as any material misstatements in the financial statements? A. The auditor accounts for the sequence of sales invoices. B. The auditor selects a sample of transactions in the sales journal and traces them to the relevant shipping documents. C. The auditor adds the transactions in the purchase journal and agrees to the total amount recorded in the general ledger. D. A test over the bank reconciliation. E. The auditor obtains a sample of timesheets for casual employees and checks for evidence of approval.arrow_forward
- The following are two specific audit objectives in the audit of accounts payable. The list referred to is the list of accounts payable taken from the accounts payable subsidiary record. The total amount in the list agrees with the accounts payable balance in the general ledger. Which of these two audit objectives validates the management assertion of existence, and which one applies to completeness? Group of answer choices 1. All accounts payable included in the list represent amounts due to valid vendors. a. existence b. occurrence 2. There are no unrecorded accounts payable. a. existence b. occurrencearrow_forwardAudit Objectives and Procedures for Accounts Receivable. In the audit of accounts receivable, auditors develop specific audit assertions related to the receivables. They then design specific substantive procedures to obtain evidence about each of these assertions.Here is a selection of accounts receivable assertions:a. Accounts receivable represent all amounts owed to the client company at the balance sheet date.b. The client company has a legal right to all accounts receivable at the balance sheet date.c. Accounts receivable are stated at net realizable value.d. Accounts receivable are properly described and presented in the financial statements.Required:For each of these assertions, select the following audit procedure (numbered 1–7) that is best suited for the audit plan. Select only one procedure for each audit objective. A procedure may be selected once, not at all, or more than once.1. Analyze the relationship of accounts receivable and sales and compare with relationships for…arrow_forwardTo gather audit evidence about the proper credit approval of sales (i.e., valuation assertion), the auditor would select a sample of documents from the population represented by the a. Subsidiary customers' accounts ledger. b. Sales invoice file. c. Bill of lading file. d. Customer order file.arrow_forward
- The following are specific balance-related audit objectives applied to the audit of accounts receivable (a. through h.) and management assertions about account balances (1 through 4). The list referred to in the specific balance-related audit objectives is the list of the accounts receivable from each customer at the balance sheet date. Specific Balance-Related Audit Objective a . There are no unrecorded receivables. b . Receivables have not been sold or discounted. c . Uncollectible accounts have been provided for. d . Receivables that have become uncollectible have been written off. e . All accounts on the list are expected to be collected within 1 year. f . The total of the amounts on the accounts receivable listing agrees with the general ledger balance for accounts receivable. g . All accounts on the list arose from the normal course of business and are not due from related parties. h . Sales cutoff at year-end is proper. Management Assertion about Account Balances 1…arrow_forward1. For each of the following audit procedures, identify A- the type of audit evidence and B- the related audit objective. a. Ask the accounts payable clerk about procedures for verifying prices, quantities, and extensions on vendors’ invoices – b. Vouch entries in sales journal to sales invoices and related shipping documents. – c. Examine the footnotes about the company’s policies for recording revenue transactions to determine whether the disclosures are reasonable d. Examine expense voucher packages and related vendors’ invoices for approval of expense account classification. e. Add the sales journal for the month of July and trace amounts to the general ledger f. Compare the quantities on hand and unit prices on this year’s inventory count sheets with those in the preceding year as a test for large differences. g. Test the extension of unit prices times quantity on the inventory list for a sample of items, test foot the list, and compare the total to the general ledger. h. Trace…arrow_forwardIdentify the eight accounts receivable balance-related audit objectives. For each objective, list one audit procedurearrow_forward
- For each of the following audit procedures, state which type of evidence-gathering technique is being used: (1) inspection or (2) computation or (3) confirmation or (4) analytical procedures or (5) enquiries or (6) observation. Agreeing the total of the accounts receivable subsidiary ledger to the accounts receivable general ledger Discussing the adequacy of the allowance for doubtful debts with the credit manager. Comparing the current year gross margin with the gross margin for the last four years. Examining a new machine to ensure that this major acquisition was Watching the client’s warehouse personnel count the raw materials Performing test counts of the warehouse personnel’s count of the raw Obtaining a letter from the client’s solicitor indicating that there were no lawsuits in progress against the Tracing the prices used by the client’s billing program for pricing sales invoices to the client’s approved price Sending a written request to the client’s customers requesting that…arrow_forwardWhich of the following audit procedures represent a substantive test of transaction that would validate managements assertion on occurrence of a purchase transaction a. Comparing the classification of the transaction based on the supplier's invoice with the company’s chart of accounts. b. Recalculation of the supplier's invoice to check its mathematical accuracy. c. Reviewing and scanning of the purchases journal for large or unusual amounts. d. Tracing from the file of receiving reports to the purchases journalarrow_forwardThe following are two specific audit objectives in the audit of accounts payable. The list referred to is the list of accounts payable taken from the accounts payable subsidiary record. The total amount in the list agrees with the accounts payable balance in the general ledger. For the audit of accounts payable, which of these two specific audit objectives is usually more important? Group of answer choices a. Audit of existence. b. Audit of completeness.arrow_forward
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