Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 18, Problem 25DQP
a.
To determine
List the type of test involved in each procedure
b.
To determine
List the transaction related objective being met for substantive test and test of control
c.
To determine
List the balance related audit objectives are being met for substantive analytical procedure and test of detail of balance
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For each of the accounts balances and associated assertions below, select the audit procedure from the list provided that gives the most appropriate audit evidence for the account assertion.
Accounts Balance
Assertion
Procedure
Inventory
Completeness
a. Examine invoices from suppliers.
b. Examine invoices paid after year-end and trace to subsidiary ledger.
c. Select items located in the inventory warehouse and trace to the inventory listing.
d. Trace sales invoices and shipping documents just after year-end to customer accounts.
Cash
Rights and obligations
a. Agree bank statement to the subsidiary ledger.
b. Agree the cash balance per the bank reconciliation to the year-end bank statement.
c. Review the bank confirmation for information on compensating balances.
d. Trace deposits per the bank statement to the cash subsidiary ledger.
Accounts Receivable
Existence
a. Review confirmation of accounts receivable…
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.
The following internal controls for the acquisition and payment cycle were selected from a standard internal control questionnaire.1. Approved purchase orders are required for all acquisitions of goods.2. Prenumbered receiving reports are prepared as support for acquisitions and numeri-cally accounted for.3. Dates on receiving reports are compared with vendors’ invoices before entry into theacquisitions journal.4. Account classifications are reviewed by someone other than the preparer.5. All supporting documents are cancelled after checks are signed or electronic fundstransfers are approved.6. The authorized signer compares data on supporting documents with checks and elec-tronic funds transfer authorizations.7. Vendors’ invoices are recalculated before payment.8. All checks are signed by the owner or manager.9. Checks are mailed by the owner or manager or a person under her supervision aftersigning.
.10. The accounts payable master file is updated, balanced, and reconciled to the…
Chapter 18 Solutions
Auditing And Assurance Services
Ch. 18 - List five asset accounts, three liability...Ch. 18 - Prob. 2DQPCh. 18 - Prob. 3DQPCh. 18 - Prob. 4DQPCh. 18 - Prob. 5DQPCh. 18 - Prob. 6DQPCh. 18 - Prob. 7DQPCh. 18 - Prob. 8DQPCh. 18 - Prob. 9DQPCh. 18 - Prob. 10DQP
Ch. 18 - Prob. 11DQPCh. 18 - Prob. 13DQPCh. 18 - Prob. 14DQPCh. 18 - Prob. 15DQPCh. 18 - Prob. 16.1MCQCh. 18 - Prob. 16.2MCQCh. 18 - Prob. 16.3MCQCh. 18 - Prob. 17.1MCQCh. 18 - Prob. 17.2MCQCh. 18 - Prob. 17.3MCQCh. 18 - Prob. 18.1MCQCh. 18 - Prob. 18.2MCQCh. 18 - Prob. 18.3MCQCh. 18 - Prob. 19DQPCh. 18 - Prob. 20DQPCh. 18 - Prob. 21DQPCh. 18 - Prob. 22DQPCh. 18 - The following misstatements are included in the...Ch. 18 - Prob. 24DQPCh. 18 - Prob. 25DQPCh. 18 - Prob. 26DQPCh. 18 - Prob. 27DQPCh. 18 - Prob. 28DQPCh. 18 - Prob. 30C
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- The following internal controls for the acquisition and payment cycle were selected from a standard internal control questionnaire.1. Approved purchase orders are required for all acquisitions of goods.2. Prenumbered receiving reports are prepared as support for acquisitions and numeri-cally accounted for.3. Dates on receiving reports are compared with vendors’ invoices before entry into theacquisitions journal.4. Account classifications are reviewed by someone other than the preparer.5. All supporting documents are cancelled after checks are signed or electronic fundstransfers are approved.6. The authorized signer compares data on supporting documents with checks and elec-tronic funds transfer authorizations.7. Vendors’ invoices are recalculated before payment.8. All checks are signed by the owner or manager.9. Checks are mailed by the owner or manager or a person under her supervision aftersigning. .10. The accounts payable master file is updated, balanced, and reconciled to the…arrow_forwardWhich 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.arrow_forwardThe following audit procedures are included in the audit programfor the audit of the financial statements of Golden State Overnight Express:1. Select a sample of acquisitions from the acquisitions journal and perform the following:a. Vouch the transaction to the voucher package that includes the matched receivingreport, purchase order, and vendor invoice.b. Verify that the purchase order was approved by an authorized purchasing agent.c. Verify that the initials of accounts payable clerk are present, indicating that thedocuments have been appropriately matched and that amounts on the vendorinvoice were verified.d. Recalculate the invoice amount and compare the dollar amounts per the invoiceto the amount recorded in the acquisitions journal.e. Examine whether the transaction was recorded to the correct vendor in theaccounts payable master file.f. Determine if the transaction was recorded in the correct month, based on whenthe goods were received and the terms of the transaction.g. Review…arrow_forward
- The following are commonly performed tests of controls and substantive tests of transactions audit procedures in the sales and collection cycle, acquisition and payment cycle, and inventory and warehousing cycle: Account for a sequence of shipping documents and examine each one to make sure that a duplicate sales invoice is attached. Compare the quantity and description of items on shipping documents with the related duplicate sales invoices. Trace a sample of voucher packages to the acquisitions journal throughout the year to determine that the transaction is included in the acquisitions journal. Determine if the transaction was recorded in the correct month, based on when the goods were received and the terms of the transaction. Required: Identify for each test the related cycle. Identify whether each audit procedure is a test of control or a substantive test of transactions. State which of the six transaction-related audit objectives each of the audit procedures fulfills.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 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_forward
- An auditor is likely to perform each of the below procedures to obtain evidence regarding the potential understatement of accounts payable at year-end (i.e., the Completeness assertion) except… Question options: Inspect purchase orders and receiving reports for accounts payable recorded at year-end. Inspect the open invoice file for invoices to be paid after year-end. All options describe procedures that can be used to identify a potential understatement of accounts payable. Analyze cash disbursements made during the first few weeks of the subsequent year and inspect supporting documentation for each disbursement.arrow_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_forward3) 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.arrow_forward
- The following are parts of a typical audit for a company with a fiscal year end of July 31. Set acceptable audit risk and decide preliminary judgment about materiality and performance materiality. Understand internal control and assess control risk. Perform substantive analytical procedures for accounts payable. Confirm accounts payable. Perform tests of controls and substantive tests of transactions for the acquisition and payment and payroll and personnel cycles. Perform other tests of details of balances for accounts payable. Perform tests for review of subsequent events. Accept the client. Issue the audit report. Required Identify the phase of the audit in which each activity occurs. Put parts 1 through 9 of the audit in the sequential order in which you would expect them to be performed in a typical audit. Identify those parts that will frequently be done before July 31.arrow_forward6) Cutoff tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of: existence rights and obligations completeness presentation and disclosure Question 7 An engagement letter is used primarily to: disclaim liability ensure a clear contractual understanding of the services to be provided by the CPA. provide management representations to be included in the audit evidence. express an opinion on the financial statements.arrow_forwardFollowing are seven audit activities.a. Examine invoices supporting recorded fixed asset additions.b. Review industry databases to assess the risk of material misstatement in the financialstatements.c. Summarize misstatements identified during testing to assess whether the overallfinancial statements are fairly stated.d. Test computerized controls over credit approval for sales transactions.e. Send letters to customers confirming outstanding accounts receivable balances.f. Perform analytical procedures comparing the client with similar companies in theindustry to gain an understanding of the client’s business and strategies.g. Compare information on purchases invoices recorded in the acquisitions journalwith information on receiving reports.For each activity listed above, indicate in which phase of the audit the procedure waslikely performed.1. Plan and design an audit approach based on risk assessment procedures (Phase I)2. Perform tests of controls and substantive tests of…arrow_forward
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