1. Distinguish between the evaluation of the adequacy of insurance coverage and the verification of prepaid insurance. Explain which is more important in a typical audit. 2. In verifying accounts payable, it is common to restrict the audit sample to a small portion of the population items, whereas in auditing accrued property taxes, it is […]
In the audit of Price Seed Company for the year ended September 30, the auditor set a tolerable misstatement of $50,000 at an ARIA of 10 percent. A PPS sample of 100 was selected from an accounts receivable population that had a recorded balance of $1,975,000. The following table shows the differences uncovered in the […]
The following are common tests of details of balances or substantive analytical procedures for the audit of accounts receivable: 1. Select 20 customer accounts from the accounts receivable master file and trace to the aged accounts receivable listing to verify name and amount. 2. Select 20 customer accounts from the aged accounts receivable listing and […]
APPLICATION OF THE AUDIT PROCESS TO THE SALES AND COLLECTION CYCLE 1. Distinguish between a positive and a negative confirmation and state the circumstances in which each should be used.2. Define what is meant by alternative procedures in the confirmation of accounts receivable and explain their purpose. Which alternative procedures are the most reliable? Why?
Design and Perform Substantive Analytical Procedures (Phase III) Design and perform substantive analytical procedures for accounts in the sales andcollection cycle.
The following is a partial audit program for the audit of sales transactions. 1. Foot the sales journal for one month and trace the postings to the general ledger. 2. Review the sales journal for any large or unusual transactions. 3. Examine sales order for evidence of credit approval prior to shipment. 4. Vouch entries […]
As a staff auditor, you need to develop a sampling plan and select an unbiased random sample for each of the three independent scenarios listed below. The in-charge on the audit engagement has instructed you to use the Excel RANDBETWEEN function to select the sample items. For each scenario, develop a sampling plan that includes […]
The following questions deal with internal controls in the sales and collection cycle. Choose the best response. a. Which of the following controls would be most effective in detecting a failure to re- cord cash received from customers paying on their accounts? (1) A person in accounting reconciles the bank deposit to the cash receipts […]
Financial Accounting: Determine and Analyze Accounts Receivable Fluffy allows their customers to pay in installments. In the current system, sales orders and payments are recorded in two separate files. The SalesOrders file records the amount the customer owes Fluffy and the payments that have been received. The CashReceipts file records all payments received. Samples of […]
The following questions deal with audit risk and evidence. Choose the best response. a. Which of the following does not increase the need for sufficient appropriate audit evidence? (1) A lower acceptable level of detection risk (2) An increase in the assessed control risk (3) A lower acceptable audit risk (4) A decrease in the […]
