Homework 8th edition Chapter 7

Homework 8th edition Chapter 7 - Multiple Choice Questions:...

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Multiple Choice Questions: 7-26. b. 7-27. d. 7-28. a. 7-29. b. (See solution 7-10 for related discussion) 7-30. c. 7-31. c. 7-32. c. 7-33. d. 7-34. b. 7-35. a. Audit Assertion b. Audit Evidence and Procedures Existence (all recorded payables exist). Examine documentation supporting accounts payable detail at the balance sheet date, (e.g., vendor's invoices and monthly statements). Completeness (All existing payables are recorded). Examine a sample of payments made after year-end to determine whether they should have been recorded as a payable. Examine all open items (items not yet recorded but for which documentation has been received) at year-end to determine whether they should be recorded as a payable. Reconcile major vendor monthly statements or confirmations with recorded accounts payable. Perform analytical procedures on major expense accounts to determine whether there is any evidence that the expense accounts might be understated in comparison with previous years. Perform a cutoff test using receiving reports of items received just before year end that should be recorded as payables according to the shipping terms. Rights/Obligations (Amounts recorded represent legal or business obligations of the organization). Review invoices, etc., in connection with the first two assertions to determine that the client has actually received the goods or services by year end and thus has a legal obligation for payment.
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a. Audit Assertion b. Audit Evidence and Procedures Existence (all recorded payables exist). Examine documentation supporting accounts payable detail at the balance sheet date, (e.g., vendor's invoices and monthly statements). Valuation (Accounts payable is properly valued according to GAAP). Most of the procedures in connection with the first three assertions establish the valuation. Examination of payments and invoices should determine the correct amounts at which the liability should be recorded. Presentation and disclosure (The account is properly classified and any contingencies are disclosed). Review documents to determine whether any of the payables carry purchase commitments that ought to be disclosed. Review financial statements and footnotes for adequate disclosure. c. Designating the company high risk because of the items in the scenario renders less reliable the first two procedures identified for the completeness assertion. There is no evidence that the client will pay all its obligations on a timely basis, and management might be motivated to systematically understate its obligations. Therefore, more evidence from the last two procedures for testing completeness will be needed. The auditor should reconcile with recorded accounts payable the monthly statements or confirmations from all major vendors and, perhaps, a sample of the other vendors, as a basis to determine whether all trade payables have been properly recorded. The auditor should also perform analytical procedures on major expense accounts to determine whether there is any evidence that the expense accounts might be understated in
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This note was uploaded on 09/20/2011 for the course ACCT 4420 taught by Professor Franz during the Spring '11 term at Toledo.

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Homework 8th edition Chapter 7 - Multiple Choice Questions:...

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