Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 8, Problem 14RQ
Your client, Harper Company, has a contractual commitment as a part of a bond indenture to maintain a
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Determine the following as a result of your audit:
a. How much of the notes payable is reported in the non-current liabilities section of the statement of financial position as of December 31, 2023?
b. How much is the correct interest expense for the year ended December 31, 2024?
show solution:
the following independent situation, discuss the issue and describe the impact on the audit record:
Iv. ZSZA Sdn. Bhd. Has been audited via your firm for the last six years. For the past three years, their monetary circumstance has been declining steadily. In the contemporary yr, for thefirst time, the modern ratio is underneath 2:1, that's the minimal requirement certain in ZSZA’s important mortgage agreement. You now have doubt about the potential of ZSZA to retain in operation for the next year.
You are the audit senior working on the audit of Tesco Ltd for the year ended 30 June 2020. While completing your risk assessment of Tesco, you note that the company appears to have a significant debt-recovery problem. The majority of Tesco’s accounts receivable are outstanding for more than 60 days. Tesco’s provision for doubtful debts is currently calculated at 1 per cent of accounts receivable at month-end. In the previous two financial years, Tesco wrote off $380 000 and $425 000 worth of accounts receivable, respectively. In those years, sales were $3 500 000 and $5 650 000, respectively.
REQUIRED:
(A) Identify the two key assertions most at risk of material misstatement in relation to accounts receivable and provide explanation why each of these assertions is at risk.
(B) Describe the substantive procedures you will perform at year end to obtain sufficient audit evidence for each assertion identified in (A).
Chapter 8 Solutions
Auditing And Assurance Services
Ch. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQCh. 8 - Prob. 11RQ
Ch. 8 - Prob. 12RQCh. 8 - Prob. 13RQCh. 8 - Your client, Harper Company, has a contractual...Ch. 8 - Prob. 15RQCh. 8 - Prob. 16RQCh. 8 - Prob. 17RQCh. 8 - Prob. 18RQCh. 8 - Prob. 19RQCh. 8 - Prob. 20RQCh. 8 - Prob. 21RQCh. 8 - Prob. 22RQCh. 8 - Prob. 23.1MCQCh. 8 - Prob. 23.2MCQCh. 8 - Prob. 23.3MCQCh. 8 - Prob. 24.1MCQCh. 8 - Prob. 24.2MCQCh. 8 - Prob. 24.3MCQCh. 8 - Which one of the following statements is correct...Ch. 8 - Prob. 25.2MCQCh. 8 - Prob. 25.3MCQCh. 8 - Prob. 26.1MCQCh. 8 - Prob. 26.2MCQCh. 8 - Prob. 26.3MCQCh. 8 - Prob. 27DQPCh. 8 - Prob. 28DQPCh. 8 - Prob. 32DQPCh. 8 - Prob. 33DQPCh. 8 - Prob. 34DQPCh. 8 - Prob. 35DQP
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
- You are an audit manager at Foyer & Associates and have been assigned to the audit of Modern Electrical Limited (MEL) for the year ending 30 June 2021. During the planning stage of the audit, you become aware of the following matters: a.MEL has significant loans from its bank. The bank has Indicated that it is concerned about MEL'S ability to meet specific loan covenants, particularly the return on total assets (net b. The aped trade accounts receivable listing indicates that the percentage of accounts receivable exceeding 90 days has jumped from 15 per cent to 37.5 per cent during the last 12 months. The credit manager hasindicated that the is because some of MEL'S Customers are currently'experiencing financial difficulty. This question.includos Part A and B part- a for each of the following scenerio describe briefly how this matter is a fraud audit risk factor in relation to mel's financial report.arrow_forwardYou are the audit senior working on the audit of Reef Building Supplies Limited (RBS), a large supplier of building materials, for the year ended 30 June 2020. While completing your risk assessment of RBS, you know that the company appears to have a significant debt recovery problem. The majority of RBS’s accounts receivable were outstanding for more than 60 days. RBS’s provision for doubtful debts is currently calculated at 1% of Accounts Receivable at month end. In the previous two financial years, RBS wrote off $760,000 and $1,050,00 worth of Accounts Receivable, respectively. In those years sales were $7,000,000 and $11,200,000, respectively. Required: Describe the substantive procedures you will carry out at year-end in order to obtain sufficient audit evidence regarding the assertions of valuation and existence in relation to Accounts Receivablearrow_forwardThe audit step most likely to reveal the existence of contingent liabilities is(1) a review of vouchers paid during the month following the year-end.(2) mortgage-note confirmation.(3) accounts payable confirmations.(4) an inquiry directed to legal counsel.arrow_forward
- Ann Marcus, CPA, is performing an audit for one of her clients, Artistcraft Ltd., a glass factory, for its December 31, 2023, year end. The audit program requires a substantive analytical procedure to be performed on the reasonableness of Artistcraft's interest expense on its long-term debt. Ann has identified the following information: Long-term debt balance confirmed by the bank in prior-year file Long-term debt balance confirmed by the bank in the current year Interest rate per the bank confirmation Balance per the general ledger Performance materiality (a) $1,545,861 $1,427,529 6.25 % $89,525 $7,000 Which of the following are true with respect to this analytic substantive procedure? The balances of the long-term debt and the interest rate are taken from bank confirmations which is external, third party evidence, and therefore highly reliable. There is no need to need to consider the reliability of the underlying data when using analytical procedures. This analytical procedure is a…arrow_forwardSelect any publicly traded company and obtain its most recent 10-K filing.Links to an external site. (within the last two years). Select a different company from your peers. Assume that you have been assigned as the auditor for this company. Choose one of the topics below to discuss: Identify the risks the company included in its filing. As the auditor, you need to be aware of these risks, as they could have misstatement implications for multiple financial statement accounts. What concerns should you have about the risk of material misstatement in the financial statements for the company you selected? Review Footnote Disclosures and discuss any pending litigation. What is the primary concern for auditors and shareholders regarding disclosure of pending litigation? Discuss any related party transactions in the Footnote Disclosures. What is the primary concern for auditors and shareholders regarding the disclosure of related party transactions?arrow_forwardYou are planning the audit of Bluechip Ltd, a company with investments in listed securities that you consider to have a low level of inherent risk. What is the most appropriate level of planning materiality for the 30 June 2021 audit given the following balances: (all amounts are in $'000) Sales: 1200 (2021); 1080 (2020); 960 (2019) Profit: 15.5 (2021); 127.1 (2020): -108.5 (2019) Current assets: 1990 (2021); 1791 (2020); 1592 (2019) a. 1.6 b. 0.8 c. 19.9 d. 12.0arrow_forward
- Assume that you will be unable to inspect the securities owned by the client on the balance sheet date. What changes should be made to audit procedures if the inspection is not performed until two weeks after the balance sheet date?arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardYou are in charge of auditing PLM (PopoyLangMalakas) Company's investmentaccounts for the year ended December 31, 2021, which was incorporated last March 3, 2020. During the course of the audit, you have obtained the balances and therelated journal entries of its investment related transactions and have revealed thefollowing information: Question 1: The adjustment to correct the interest income for 2021 includes adebit/(credit) to the interest revenue account amounting to? (Put a negativesign if credit) Question 2: How much is the retroactive adjustment to the beginning balance ofretained earnings for the year 2021, pertaining to the investment in BSP bonds?(Please indicate debit or (credit), use negative sign if credit).Question 3: The correct amount of investment in BSP bonds that should bepresented in the statement of financial position as of December 31, 2021 is?arrow_forward
- Determine the following as a result of your audit: a. How much is the correct total interest income related to notes receivable reported in the 2022 Statement of Comprehensive Income? b. How much is the net understatement (overstatement) of profit reported in the Statement of Comprehensive Income in 2022?arrow_forwardA public company has asked for your help. They are having a hard time dealing with earningsper share and would like your consultation. They are planning on issuing a few securities in thecoming year and would like your help. Please discuss how these two issues will impact thediluted earnings per share calculation.1) Convertible debt where a required conversion will take place ten years after the issuedate2) Debt with detachable warrants. The warrants may be exercised if profits exceed acertain threshold in the next five years ($1,000,000 is the threshold).arrow_forwardCompany has implemented a new “bonus scheme” during the year, whereby the directors would be awarded a bonus of a percentage of the profits for the current year if they could exceed the previous year’s profit by 25%. Required: i). Which component of the Audit Risk Model (ARM) would be affected, and how? ii). Discuss how your audit plan would be affected.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
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher: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
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Current assets and current liabilities; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Jw4TaiP42P4;License: Standard youtube license