Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 13, Problem 26DQP
a.
To determine
Identify the transaction cycle that is audited for each
a.
Expert Solution
Explanation of Solution
| Audit procedure | Transaction cycle |
| Collection of evidence related to internal verification of price, extensions and quantities by examining sales invoice | Revenue |
| Examine the items in company’s warehouse by selecting items from client’s perpetual inventory records | Inventory and warehousing |
| Using audit software to foot and cross foot the cash disbursements journal and trace the balance to the general ledger | Acquisition and payment |
| Determine whether the management has included key disclosures in the footnotes to the financial statements by examining loan agreement for important information | Capital acquisition and repayment |
| Determine the existence of entries by tracing sample entries in the acquisition journal to the related vendor’s invoice | Acquisition and payment |
| Determine whether the acquisition transactions are recorded in proper period by examining documentation before and after the balance sheet date | Acquisition and payment |
| Compute inventory turnover for major products and compare with previous years | Inventory and warehousing |
| Confirm sample of note payable balances, collateral and interest rates with lenders | Capital acquisition and repayment |
| Use audit software to foot the | Revenue |
Table (1)
b.
To determine
Identify the type of evidence for each audit procedure enlisted
b.
Expert Solution
Explanation of Solution
| Audit procedure | Evidence type |
| Collection of evidence related to internal verification of price, extensions and quantities by examining sales invoice | Inspection |
| Examine the items in company’s warehouse by selecting items from client’s perpetual inventory records | Physical Examination |
| Using audit software to foot and cross foot the cash disbursements journal and trace the balance to the general ledger | Recalculation |
| Determine whether the management has included key disclosures in the footnotes to the financial statements by examining loan agreement for important information | Confirmation |
| Determine the existence of entries by tracing sample entries in the acquisition journal to the related vendor’s invoice | Inspection |
| Determine whether the acquisition transactions are recorded in proper period by examining documentation before and after the balance sheet date | Inspection |
| Compute inventory turnover for major products and compare with previous years | Analytical Procedure |
| Confirm sample of note payable balances, collateral and interest rates with lenders | Confirmation |
| Use audit software to foot the accounts receivable trial balance and compare the balance with the general ledger | Recalculation |
Table (2)
c.
To determine
Identify whether the audit procedures are test of control or substantive test
c.
Expert Solution
Explanation of Solution
| Audit procedure | Type of procedure |
| Collection of evidence related to internal verification of price, extensions and quantities by examining sales invoice | Test of control |
| Examine the items in company’s warehouse by selecting items from client’s perpetual inventory records | Substantive |
| Using audit software to foot and cross foot the cash disbursements journal and trace the balance to the general ledger | Substantive |
| Determine whether the management has included key disclosures in the footnotes to the financial statements by examining loan agreement for important information | Substantive |
| Determine the existence of entries by tracing sample entries in the acquisition journal to the related vendor’s invoice | Test of control or substantive |
| Determine whether the acquisition transactions are recorded in proper period by examining documentation before and after the balance sheet date | Substantive |
| Compute inventory turnover for major products and compare with previous years | Substantive |
| Confirm sample of note payable balances, collateral and interest rates with lenders | Substantive |
| Use audit software to foot the accounts receivable trial balance and compare the balance with the general ledger | Substantive |
Table (3)
d.
To determine
Identify whether the audit procedures enlisted are substantive test of transactions, test of details of balances or a substantive analytical procedure.
d.
Expert Solution
Explanation of Solution
| Audit procedure | Evidence type |
| Collection of evidence related to internal verification of price, extensions and quantities by examining sales invoice | Not applicable |
| Examine the items in company’s warehouse by selecting items from client’s perpetual inventory records | Test of details of balances |
| Using audit software to foot and cross foot the cash disbursements journal and trace the balance to the general ledger | Substantive test of transactions |
| Determine whether the management has included key disclosures in the footnotes to the financial statements by examining loan agreement for important information | Test of details of balances |
| Determine the existence of entries by tracing sample entries in the acquisition journal to the related vendor’s invoice | Substantive test of transactions |
| Determine whether the acquisition transactions are recorded in proper period by examining documentation before and after the balance sheet date | Substantive test of transaction |
| Compute inventory turnover for major products and compare with previous years | Analytical Procedure |
| Confirm sample of note payable balances, collateral and interest rates with lenders | Test of details of balances |
| Use audit software to foot the accounts receivable trial balance and compare the balance with the general ledger | Test of details of balances |
Table (4)
e.
To determine
Identify transaction related audit objectives being satisfied for each substantive test or test of control of transaction procedure
e.
Expert Solution
Explanation of Solution
| Audit procedure | Objectives satisfied |
| Collection of evidence related to internal verification of price, extensions and quantities by examining sales invoice | Accuracy |
| Examine the items in company’s warehouse by selecting items from client’s perpetual inventory records | Not applicable |
| Using audit software to foot and cross foot the cash disbursements journal and trace the balance to the general ledger | Not applicable |
| Determine whether the management has included key disclosures in the footnotes to the financial statements by examining loan agreement for important information | Accuracy |
| Determine the existence of entries by tracing sample entries in the acquisition journal to the related vendor’s invoice | Occurrence |
| Determine whether the acquisition transactions are recorded in proper period by examining documentation before and after the balance sheet date | Not applicable |
| Compute inventory turnover for major products and compare with previous years | Not applicable |
| Confirm sample of note payable balances, collateral and interest rates with lenders | Not applicable |
| Use audit software to foot the accounts receivable trial balance and compare the balance with the general ledger | Not applicable |
Table (5)
f.
To determine
Identify the balance related audit objectives being satisfied for each test of details of balance procedure or substantive analytical procedure.
f.
Expert Solution
Explanation of Solution
| Audit procedure | Objectives satisfied |
| Collection of evidence related to internal verification of price, extensions and quantities by examining sales invoice | Not applicable |
| Examine the items in company’s warehouse by selecting items from client’s perpetual inventory records |
Existence |
| Using audit software to foot and cross foot the cash disbursements journal and trace the balance to the general ledger | Detail tie in |
| Determine whether the management has included key disclosures in the footnotes to the financial statements by examining loan agreement for important information | Accuracy |
| Determine the existence of entries by tracing sample entries in the acquisition journal to the related vendor’s invoice | Existence |
| Determine whether the acquisition transactions are recorded in proper period by examining documentation before and after the balance sheet date | Not applicable |
| Compute inventory turnover for major products and compare with previous years | Realizable value |
| Confirm sample of note payable balances, collateral and interest rates with lenders | Existence and accuracy |
| Use audit software to foot the accounts receivable trial balance and compare the balance with the general ledger | Detail tie in |
Table (6)
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Students have asked these similar questions
To test whether debits to accounts receivable represent valid transactions, the auditor should trace entries from the
A. Accounts receivable ledger to sales documentation.
B. Sales journal to the accounts receivable ledger.
C. Accounts receivable ledger to the cash receipts journal.
D. Cash receipts documentation to the accounts receivable ledger.
Which of the following audit procedures is aimed most directly at testing the completeness assertion for accounts payable?
Footing the list of accounts payable.
Tracing shipping reports after year-end to related customer purchase orders and invoices.
Examining underlying documentation for cash disbursements in the period after year-end.
Tracing shipping reports issued on or before year-end to related customer purchase orders and invoices.
of
stion
For a sample of sales transactions selected from the sales journal, verify that the amount of the transaction has
been recorded in the correct customer account in the accounts receivable subledger.
Choose the Audit Objective:
Choose the specific audit objective
→
Chapter 13 Solutions
Auditing And Assurance Services
Ch. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Explain how the calculation and comparison to...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - For each of the eight types of evidence discussed...
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Prob. 16RQCh. 13 - Prob. 17RQCh. 13 - Prob. 18RQCh. 13 - Prob. 19RQCh. 13 - Prob. 20RQCh. 13 - Prob. 21.1MCQCh. 13 - Prob. 21.2MCQCh. 13 - A conceptually logical approach to the auditors...Ch. 13 - Prob. 22.1MCQCh. 13 - Prob. 22.2MCQCh. 13 - Prob. 22.3MCQCh. 13 - Prob. 23.1MCQCh. 13 - b. Substantive analytical procedures are most...Ch. 13 - Prob. 23.3MCQCh. 13 - Prob. 24DQPCh. 13 - Prob. 25DQPCh. 13 - Prob. 26DQPCh. 13 - Prob. 27DQPCh. 13 - Prob. 28DQPCh. 13 - Prob. 29DQPCh. 13 - Prob. 30DQPCh. 13 - Prob. 31DQPCh. 13 - Prob. 32DQPCh. 13 - Prob. 33DQPCh. 13 - Prob. 34DQPCh. 13 - Prob. 35DQP
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