13 20 the eight balance related audit objectives and

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13-20 The eight balance-related audit objectives and related procedures are as follows: GENERAL BALANCE- RELATED AUDIT OBJECTIVE SPECIFIC OBJECTIVE AUDIT PROCEDURE Detail tie-in Inventory on the inventory summary agrees with the physical count, the extensions are correct, and the total is correctly added and agrees with the general ledger. Check extensions of price times quantity on a sample basis, foot the detailed inventory summary, and trace the balance to the general ledger and financial statements. Existence Inventory as stated in financial statements actually exists. Trace inventory from final inventory summary to actual inventory and physically count selected items. Completeness Existing inventory items have been counted and included in the financial statements. Select items from the physical inventory and trace to the client's final summary to make sure that all items are included. 13-6
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13-20 (continued) GENERAL BALANCE- RELATED AUDIT OBJECTIVE SPECIFIC OBJECTIVE AUDIT PROCEDURE Accuracy Inventory items included in the financial statements are stated at the correct amounts. Perform price tests of inventory by examining supporting vendors' invoices for selected inventory items and reverify price times quantity. Classification Inventory as included in the financial statements is properly classified. Compare the classification of inventory into raw materials, work in process, and finished goods by comparing the description on physical inventory count tags with the client's final inventory listing. Cutoff Inventory cutoff is properly recorded at the balance sheet date. Trace selected receiving reports several days before and after the balance sheet date to determine whether inventory purchases are recorded in the proper period and related physical inventory counts are included or excluded from inventory. Realizable value Inventory on the financial statements excludes unusable items. Inquire of factory employees and management regarding obsolescence of inventory, and examine storeroom for evidence of damaged or obsolete inventory. Rights and obligations Inventory items in the financial statements are owned by the client. Review contracts with suppliers and customers for the possibility of the inclusion of consigned or other non-owned inventory. 13-21 Auditors frequently consider it desirable to perform audit tests throughout the year rather than waiting until year-end because of the CPA firm's difficulty of scheduling personnel and the client’s need for timely financial statements. Due to the uneven distribution of the year-end dates of their clients, there is a shortage of personnel during certain periods of the year and excess available time at other periods. The procedures that are performed at a date prior to year-end are often dependent upon adequate internal controls and when the client will have the information available. Additionally, public company auditors must begin their testing of controls earlier in the year to ensure they are able to test a sufficient sample of controls for operating effectiveness. Some controls may only be performed monthly 13-7
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  • Spring '08
  • Brady,J
  • Controls, substantive tests

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