D 7 use of comparisons and relationships to assess

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Unformatted text preview: sample of prelistings of cash receipts to the cash receipts journal, testing for names, amounts, and dates. (1) . (2) . 5. A V 87. challenging Vouch recorded sales from the sales journal to the file of bills of lading. (1) . (2) . Examine customer order forms for credit approval by the credit manager. (1) . (2) . Below are five audit procedures, all of which are tests of transactions associated with the audit of the acquisition and payment cycle. Also below are the six general transaction-related audit objectives and the five management assertions. For each audit procedure, indicate (1) its audit objective, and (2) the management assertion being tested. A. B. C. D. E. F. Audit Objectives Occurrence Completeness Accuracy Posting and summarization Classification Timing Assertions V. Occurrence W. Completeness X. Accuracy Y. Classification Z. Cutoff 1. Foot the purchases journal and trace the totals to the related general ledger accounts. (1) . (2) . 2. Recompute the cash discounts taken by the client. (1) . (2) . 3. Compare dates on cancelled checks with the bank cancellation date. (1) . (2) . 4. Trace from a sample of cancelled checks to the cash disbursements journal. (1) . (2) . D X C X F Z B W 1-108 A V 88. challenging 5. Examine supporting documentation for a sample of transactions for authorized payee and amount and to determine services or goods were received. (1) . (2) . Below are five audit procedures, all of which are tests of balances associated with the audit of accounts receivable. Also below are the eight general balance-related audit objectives and the four management assertions. For each audit procedure, indicate (1) its audit objective, and (2) the management assertion being tested. A. B. C. D. E. F. G. H. Audit Objectives Existence Completeness Accuracy Classification Cutoff Detail tie-in Realizable value Rights and obligations Assertions V. Existence W. Completeness X. Valuation and allocation Y. Rights and obligations F X 1. Obtain an aged listing of accounts receivable. For a sample of individual customers on the listing, agree the customer’s name, amount, and other information with the corresponding information in the accounts receivable master file. (1) . (2) . E X 2. Examine details of sales for five days before and five days after year-end to determine whether sales have been recorded in the proper period. (1) . (2) . 3. Assess the reasonableness of the balance in the allowance for doubtful accounts. (1) . (2) . 4. Inquire as to whether any accounts receivable have been factored or sold during the period. (1) . (2) . 5. Inquire as to whether there are any receivables from related parties. (1) . (2) . G X H Y D X 89. easy b Responsibility for the fair presentation of financial statements rests equally with management and the auditor. a. True b. False 90. easy b Errors are usually more difficult for an auditor to detect than frauds. a. True b. False 1-109 91. easy b Auditors have found that the most efficient way to conduct audits is to focus primarily on testing classes of transactions and performing minimal or no tests of ending account balances. a. True b. False 92. easy a When an auditor has reduced assessed control risk based on tests of controls, he or she may then reduce the extent to which the accuracy of the financial statement information directly related to those controls must be supported through the accumulation of evidence using substantive tests. a. True b. False 93. easy b Tests of details of balances typically involve the use of comparisons and relationships to assess the overall reasonableness of account balances. a. True b. False 94. easy a Other than inquiring of management about policies they have established to prevent illegal acts and whether management knows of any laws or regulations that the company has violated, the auditor should not search for indirect-effect illegal acts unless there is reason to believe they may exist. a. True b. False 95. easy a When an auditor believes that an illegal act may have occurred, the first step he or she should take is to inquire of management at a level above those likely to be involved in the potential illegal act. a. True b. False 96. medium b Audits are expected to provide a higher degree of assurance for the detection of material frauds than is provided for an equally material error. a. True b. False 97. medium a Auditors have a higher degree of responsibility for detecting direct-effect illegal acts than indirecteffect illegal acts. a. True b. False 98. medium b The auditor’s first course of action when an illegal act is uncovered should be to immediately notify the appropriate authorities, including but not limited to the police, and for publicly held companies, the Securities and Exchange Commission. a. True b. False 99. medium b Under the cycle approach to segmenting an audit, transactions recorded in different journals should never be combined with the general ledger balances that result from those transactions. a. True b. False 100. medium b General transaction-related audit objectives vary from audit to audit, depending on the nature and characteristics of the client’s business and i...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.

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