The Broughton Cap Company requires that prenumbered receiving reports be completed when purchased inventory items arrive in the receiving department. At the time of receipt, the receiving clerk writes the date of receipt on the receiving document. The last receipt in the fiscal year ended June 30, 2019, was recorded on receiving report 7280. The […]
Assume you performed sampling for an accounts receivable population with a recorded population amount of $2,000,000. Tolerable misstatement is set at $100,000 for the test, and there are no individually significant accounts greater than M$100,000. Several different sampling results for this population are presented below; the upper bound is the projected misstatement plus an allowance […]
Chen, CPA, is auditing the financial statements of a manufacturing company with a significant amount of trade accounts receivable. Chen is satisfied that the accounts are correctly summarized and classified and that allocations, reclassifications, and valuations are made in accordance with GAAP. Chen is planning to use accounts receivable confirmation requests to obtain sufficient appropriate […]
Test of Details of Balances,Test of Control, or Substantive Test of Transactions Audit Procedure 1. Confirm accounts receivable ending balances and sales terms, such as right of return and consignment arrangements. 2. Review sales returns after the balance sheet date to determine whether any are ap- plicable to the current year. 3. Compare dates on […]
The following questions concern analytical procedures in the sales and collection cycle. Choose the best response. a. As a result of analytical procedures, the auditor determines that the gross profit per- centage has declined from 30 percent in the preceding year to 20 percent in the cur- rent year. The auditor should (1) express a […]
COMPLETING THE TESTS IN THE SALES AND COLLECTION CYCLE: ACCOUNTS RECEIVABLE 1. Describe two types of substantive analytical procedures often performed in the audit of the sales and collection cycle and describe how they might indicate a possible misstatement in the financial statements. 2. Which of the nine accounts receivable balance-related audit objectives can be […]
Items 1 through 10 are selected questions of the type generally found in internal control questionnaires used by auditors to obtain an understanding of internal control in the sales and collection cycle. In using the questionnaire for a client, a “yes” response to a question indicates a possible internal control, whereas a “no” indicates a […]
The following are audit procedures from different transaction cycles: 1. Examine sales invoices for evidence of internal verification of prices, quantities, and extensions. 2. Select items from the client’s perpetual inventory records and examine the items in the company’s warehouse. 3. Use audit software to foot and cross-foot the cash disbursements journal and trace the […]
1. What are the five types of tests auditors use to determine whether financial statements are fairly stated? Identify which tests are performed to reduce control risk and which tests are performed to reduce planned detection risk. 2. In Figure 13-4, explain the differences among C3, C2, and C1. Explain the circumstances under which it […]
Use the five types of audit tests to determine whether financial statements are fairly stated. Select the appropriate types of audit tests. Understand the concept of evidence mix and how it should be varied in different circumstances. Design an audit program. Compare and contrast transaction-related audit objectives with balance-related audit objectives, including those related to […]
