answers to problems and case-arens-chapter 6

answers to problems and case-arens-chapter 6 - 6-17a.1....

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Unformatted text preview: 6-17a.1. External7. Internal13. Internal2. Internal8. Internal14. External3. External9. External15. Internal4. External10. Internal*16. External5. Internal*11. External17. External6. Internal12. External***Even though these may be signed or initialled by employees, they are still internal documents.**Bills of lading are ordinarily signed by the freight company. That signature will be included on the top of the bill of lading, therefore, it is an external document.b.External evidence is considered to be more reliable than internal evidence because external evidence has been in the hands of both the client and another party, implying agreement about the information and the conditions stated on the document.6-181.(3) inquiries of the client11.(2) observation2.(2) observation12.(1) inspection3.(1) inspection13.(7) analytical procedures4.(4) confirmation14.(1) inspection5.(5) recalculation15.(3) inquiries of the client6.(4) confirmation16.(7) analytical procedures7.(1) inspection17.(1) inspection or (6) reperformance8.(7) analytical procedures18.(5) recalculation 9.(3) inquiries of the client19.(1) inspection10.(6) reperformance20.(4) confirmation6-20a.Confirmations are normally more reliable evidence than inquiries of the client because of the independence of the outside party confirming the information.b.Confirmation of bank balances is considered highly reliable whereas confirmation of a department store charge account is often not considered reliable. Banks are accustomed to confirmations from auditors and normally maintain excellent accounting records, whereas most customers of department stores have neither characteristic.c.If an auditor is not qualified to distinguish between valuable inventory (e.g., diamonds) and worthless inventory (e.g., glass), the physical examination of inventory would not be considered to be reliable evidence.d.Recalculation tests are highly reliable because the auditor is able to gain 100% assurance of the accuracy, but the tests only verify whether the recorded amounts are accurately totaled. These tests do not uncover omissions or fictitious amounts.e.Relatively reliable documentation examples include: vendor statements, bank statements, and signed lease agreements. Relatively unreliable documentation examples may be: copies of customer invoices, internal memoranda and other communications, and a listing of fixed asset additions.The difference between reliable and unreliable documentation examples above is whether they originate from outside or inside the client's organization. External information is considered more reliable than internal documentation.f.1.Confirmation of accounts receivable - Corporation accustomed to confirmations compared to a member of the general public....
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This note was uploaded on 02/19/2012 for the course ACCT Audit taught by Professor Niki during the Spring '12 term at Saint Mary's University Texas.

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answers to problems and case-arens-chapter 6 - 6-17a.1....

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