Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 22, Problem 19.2MCQ
To determine
Indicate the substantive procedures that will be used by auditor to test the valuation assertion related to the client’s
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Students have asked these similar questions
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…
The auditor has a responsibility to design audit procedures to obtain sufficient and appropriate evidence. Apply two types of audit procedures that the auditor might use to support each of the following.
i. Physical attendance at stock take
ii. Valuation of accounts receivable
iii. Balance in Bank
iv. Authorised and paid-up share capital
v. Accounts payable
For a subsequent event condition existing on or before the balance sheet date, the auditor should
Group of answer choices
Consider a note disclosure
Report to audit committee
Alert shareholders directly
Adjust financial statement amounts
Chapter 22 Solutions
Auditing And Assurance Services
Ch. 22 - List four examples of interest-bearing liability...Ch. 22 - Prob. 2RQCh. 22 - Prob. 3RQCh. 22 - Prob. 4RQCh. 22 - Prob. 5RQCh. 22 - Distinguish between (a) tests of controls and...Ch. 22 - Prob. 7RQCh. 22 - Prob. 8RQCh. 22 - Prob. 9RQCh. 22 - Prob. 10RQ
Ch. 22 - Prob. 11RQCh. 22 - Prob. 12RQCh. 22 - Prob. 13RQCh. 22 - Prob. 14RQCh. 22 - Prob. 15RQCh. 22 - Explain the relationship between the audit of...Ch. 22 - Prob. 17.1MCQCh. 22 - Prob. 17.2MCQCh. 22 - Prob. 17.3MCQCh. 22 - Prob. 18.1MCQCh. 22 - Prob. 18.2MCQCh. 22 - Prob. 18.3MCQCh. 22 - Prob. 19.1MCQCh. 22 - Prob. 19.2MCQCh. 22 - Prob. 19.3MCQCh. 22 - Prob. 20DQPCh. 22 - Prob. 21DQPCh. 22 - Prob. 22DQPCh. 22 - Prob. 23DQPCh. 22 - Prob. 24DQPCh. 22 - Prob. 25DQPCh. 22 - Prob. 26DQPCh. 22 - Prob. 27DQPCh. 22 - Prob. 28DQPCh. 22 - Prob. 29DQPCh. 22 - Prob. 30DQP
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Similar questions
- If the auditor verifies a debtor’s account balance, which is comprised of a number of transactions, at the end of the financial period by sending a debtor’s confirmation request, this is an example of a Select one: A. substantive test of transactions B. test of controls C. substantive analytical procedure D. substantive test of balancesarrow_forwardWhich of the following procedures would most likely help an auditor identify events after the date of the financial statements that should be disclosed? A.Review changes in the interest rate for cash accounts. B.Follow up on accounts receivable confirmations that were not returned for additional loss accruals. C.Inquire about changes in capital stock that was issued or repurchased. D.Evaluate depreciation schedules for additional depreciation expense.arrow_forwardMost auditors believe that financial statements are "presented fairly" when the statements are in accordance with GAAP, and that it is also necessary to Select one: a. assure investors that net income reported this year will be exceeded in the future b. review the statements using the accounting principles promulgated by the SEC c. examine the substance of transactions and balances for possible misinformationarrow_forward
- The purpose of an audit is to A. provide financial statement users with an opinion by an independent auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework B. provide internal auditors with an opinion by the external auditor on whether the financial statements are presented fairly in accordance with an applicable financial reporting framework C. provide absolute assurance that the financial statements conform to Generally Accepted Accounting Principles (GAAP) D. help management ensure yearly bonuses will be receivedarrow_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_forwardWhich 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_forward
- How can the auditor determine that all dividends applicable to marketable securities owned by the client have been received and recorded?arrow_forwardWhich of the following is least likely to be a procedure included in an accountant’s review of interim financial information of a public entity? a.Compare disaggregated revenue data by month to that of the previous interim period. b.Read available minutes of meetings of stockholders. c.Inquire of management concerning significant journal entries and other adjustments. d.Observe counting of physical inventory.arrow_forwardDuring the auditor's risk assessment procedures, a meeting was held together with the company's management. During the meeting, management has discussed that the company recently acquired bond securities from various government agencies and publicly listed shares. In light of this, the audit senior asked the management about the company's investment policy, risk appetite and investment objectives. The audit senior's inquiry would most likely address which assertion? a. Rights and obligations b. Occurence c. Completeness d. Valuationarrow_forward
- Which of the following substantive procedures would auditors most likely perform to obtain evidence about the occurrence of subsequent events?a. Recompute a sample of large-dollar transactions occurring after the date of the financial statements for arithmetic accuracy.b. Investigate changes in shareholders’ equity occurring after the date of the financial statements.c. Send confirmations to vendors with whom the client normally does business but for which no balance in accounts payable is noted.d. Confirm bank accounts established after the date of the financial statements.arrow_forwardWhen auditing an investment in another company, an auditor most likely would seek to conduct which audit procedure to help satisfy the valuation assertion?a. Inspect the stock certificates evidencing the investment.b. Examine the audited financial statements of the investee company.c. Review the broker’s advice or canceled check for the investment’s acquisition.arrow_forwardThe 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.arrow_forward
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