Principles of Auditing & Other Assurance Services (Irwin Accounting)
20th Edition
ISBN: 9780077729141
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 47OQ
To determine
Identify the most reasonable explanation for the change in the given ratios from year 1 to year 2.
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Students have asked these similar questions
You are involved with the audit of Jelco Company for year 1 and have been asked to consider the confirmation reply results indicated
below. For each confirmation reply, select the proper action to be taken from the following possible actions: (Each of the "Action"
items may be used once, more than once, or not at all.)
(1)Exception; propose an adjustment.
(2)Send a second confirmation request to the customer.
(3) Examine shipping documents and/or subsequent cash receipts.
(4)Verify whether the additional invoices noted on the confirmation reply pertain to
the year under audit or the subsequent year.
(5) Not an exception; no further audit work is necessary.
Proper
Action
Customer Reply (and any audit action already taken)
a. "We mailed the check for this on December 31."
"We returned those goods on December 2." You have been able to determine that the goods were received by the client
on December 29, but not recorded until January 2.
c. "We also owe for two more invoices for purchases…
Indicate whether you agree or disagree with the following statements and explain your reasoning.
Teresa Dziuba was assigned to the Heathcliff Energy audit. She was ensuring that when
recognizing revenues, all transactions and events that should have been recorded have been
recorded. She was testing the existence assertion.
Assume materiality for the financial statements as a whole is $200,000 and performance materiality
for accounts receivable is set at $80,000. If the auditor finds one receivable that is overstated by
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Steve Slopak, the group partner was reviewing the work of Manny Fernandez on the Lake Shore
Gold account. Manny asked Steve for an explanation on how audit risk_ould affect his work.
Steve answered: “Audit risk affects the quantity and quality of evidence gathering."
In performing an audit, you encounter an adjusting journal entry recorded at year-end that contains a debit to rental revenue and a credit to deferred rental revenue. The purpose of this journal entry is to record
Chapter 5 Solutions
Principles of Auditing & Other Assurance Services (Irwin Accounting)
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Distinguish among routine, nonroutine, and...Ch. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - As part of the verification of accounts receivable...Ch. 5 - Prob. 9RQCh. 5 - When in the course of an audit might the auditors...
Ch. 5 - Prob. 11RQCh. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14RQCh. 5 - Prob. 15RQCh. 5 - Prob. 16RQCh. 5 - Prob. 17RQCh. 5 - What disclosures should be made in the financial...Ch. 5 - Prob. 19RQCh. 5 - Prob. 20RQCh. 5 - Prob. 21RQCh. 5 - Prob. 22RQCh. 5 - Prob. 23RQCh. 5 - Prob. 24RQCh. 5 - Prob. 25RQCh. 5 - Prob. 26RQCh. 5 - Prob. 27RQCh. 5 - Prob. 28RQCh. 5 - Prob. 29RQCh. 5 - I have finished my testing of footings of the cash...Ch. 5 - Prob. 31RQCh. 5 - Prob. 32RQCh. 5 - Financial statements contain a number of...Ch. 5 - Prob. 34QRACh. 5 - In an audit of financial statements, the auditors...Ch. 5 - Prob. 36QRACh. 5 - Prob. 37QRACh. 5 - Prob. 38QRACh. 5 - Prob. 39QRACh. 5 - Prob. 40QRACh. 5 - Prob. 41QRACh. 5 - Prob. 42QRACh. 5 - Prob. 43AOQCh. 5 - Prob. 43BOQCh. 5 - Prob. 43COQCh. 5 - Prob. 43DOQCh. 5 - Prob. 43EOQCh. 5 - Prob. 43FOQCh. 5 - Prob. 43GOQCh. 5 - Prob. 43HOQCh. 5 - Prob. 43IOQCh. 5 - Prob. 43JOQCh. 5 - Prob. 43KOQCh. 5 - A difference of opinion concerning accounting and...Ch. 5 - Prob. 44OQCh. 5 - Prob. 45OQCh. 5 - Prob. 46AOQCh. 5 - Prob. 46BOQCh. 5 - Prob. 46COQCh. 5 - The cost of analytical procedures in terms of time...Ch. 5 - Prob. 46EOQCh. 5 - Prob. 47OQCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 56RDC
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Similar questions
- Consider the following audit work performed by two auditors, Suzy and Gary:(a) Suzy attended the client’s year-end stocktake and observed that the client followed the stocktake instructions. She selected numerous items for test counting from the client’s inventory sheets and all were found to be correct. Cut-off details were noted and subsequently checked and found to be correctly treated. Suzy concluded that inventory was fairly stated.(b) Maintenance expenses were material, although it was only 50% of last year’s balance. Gary selected a large sample of entries and agreed them to supporting documents. No errors were found. Gary concluded that maintenance expenses were reasonable. Required:Indicate whether sufficient appropriate audit evidence has been obtained to support the conclusions for the inventory and maintenance expenses accounts.Explain your answers.arrow_forwardDuring the course of the year 2 audit of Smithsone Company, the auditor discovered the following situations that may or may not require an adjusting journal entry. Each audit finding is independent of any of the other findings. Select the account or accounts that would comprise the adjusting journal entry, if required, to correct the audit finding. Accounts may be used once, more than once, or not at all. Audit finding The bank’s confirmation reply regarding the company’s line of credit indicated that the December, year 2, interest was unpaid at year-end. Accruals for monthly interest expense have been made for 11 months in year 2 by the company. Employee overtime pay for hours worked before year-end, but paid in the following year, were not recorded in year 2. In the last week of year 2, the company recorded revenue for services rendered to some clients in year 3. During year 2, a former client sued the company for inappropriate work. Legal counsel has advised that it is…arrow_forwardThe following two tests were carried out on the accounts payable at Gardens Nursing Home: 1: A number of suppliers were selected from the list of trade creditors at year-end and balances traced to supplier invoices and goods received notes to ensure goods were received prior to the year-end. For two creditors out of 15 tested the balance was only marginally overstated. Audit conclusion: Accepted as no material errors located. 2: Selected a number of suppliers’ invoices and checked that the pricing and discount terms have been reviewed and authorized by the purchase manager. Three out of 20 invoices tested had not been authorized and incorrect discounts were recorded for these invoices. A follow-up of the three samples with deviations did not highlight a pattern or specific reason for the errors. Audit conclusion: Accepted as the errors in discounts claimed were immaterial. Required: For each of the test results for Gardens Nursing Home: (a) Identify whether this is a test…arrow_forward
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