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5) Which of the following best describes tests of details of balances?A) Audit procedures designed to test for monetary misstatements in the accounts summarized in the financial statementsB) Audit procedures designed to test for the monetary amounts of transactionsC) Audit procedures designed to test for reasonableness of account balancesD) Audit procedures designed to test for effectiveness in recording accounting informationAnswer: ATerms: Details of balancesDiff: ChallengingObjective: LO 6-8AACSB: Reflective thinking skills6) Which of the following statements is nottrue?DDiff: ModerateObjective: LO 6-7 and LO 6-8AACSB: Reflective thinking skills
7) An important balance related audit objective is realizable value. Describe the purpose of this audit objective, what it is concerned with, and give an example.Example–allowance for uncollectible accounts, write-downs of inventory.Terms: Balance related objective of realizable valueDiff: ChallengingObjective: LO 6-8AACSB: Reflective thinking skills35
8) 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) themanagement assertion being tested.Audit ObjectivesA. ExistenceB. CompletenessC. AccuracyD. ClassificationE. CutoffF. Detail tie-inG. Realizable valueH. Rights and obligationsAssertionsV. ExistenceW. CompletenessX. Valuation and allocationY. Rights and obligations1. 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) ________.2. Examine details of sales for five days before and five days after year-end to determine whethersales have been recorded in the proper period.