For each of the accounts balances and associated assertions below, select the audit procedure from the list provided that gives the most appropriate audit evidence for the account assertion. Accounts Balance Assertion Procedure Inventory Completeness a. Examine invoices from suppliers. b. Examine invoices paid after year-end and trace to subsidiary ledger. c. Select items located in the inventory warehouse and trace to the inventory listing. d. Trace sales invoices and shipping documents just after year-end to customer accounts. Cash Rights and obligations a. Agree bank statement to the subsidiary ledger. b. Agree the cash balance per the bank reconciliation to the year-end bank statement. c. Review the bank confirmation for information on compensating balances. d. Trace deposits per the bank statement to the cash subsidiary ledger. Accounts Receivable Existence a. Review confirmation of accounts receivable balances and agree to accounts receivable subsidiary ledger. b. Review list of accounts written off during the year. c. Review schedule of bad debt expense. d. Trace sales invoice and shipping documents just before year-end to customer accounts. Accrued Payroll Cut-off a. Review union agreements and recalculate the payroll expense based on the union wage rates. b. Perform analytical procedures comparing the current year payroll expense to the prior year. c. Review timecards for the period of one week before and after year-end and compare to management’s computation of wages not paid as of year-end. d. Compare the wages reported on form 941 to the IRS to wages indicated on the general ledger. Fixed Assets Valuation a. Compare the useful lives assigned to new fixed asset purchases to useful lives assigned in prior years to similar assets. b. Vouch new additions back to the invoices, cancelled check and properly approved purchase order. c. Trace fixed assets observed to the fixed asset master control listing. d. Interview the plant manager regarding repair and maintenance expenses.
For each of the accounts balances and associated assertions below, select the
|
Accounts Balance |
Assertion |
Procedure |
|
Inventory |
Completeness |
a. Examine invoices from suppliers. b. Examine invoices paid after year-end and trace to subsidiary ledger. c. Select items located in the inventory warehouse and trace to the inventory listing. d. Trace sales invoices and shipping documents just after year-end to customer accounts. |
|
Cash |
Rights and obligations |
a. Agree bank statement to the subsidiary ledger. b. Agree the cash balance per the bank reconciliation to the year-end bank statement. c. Review the bank confirmation for information on compensating balances. d. Trace deposits per the bank statement to the cash subsidiary ledger. |
|
|
Existence |
a. Review confirmation of accounts receivable balances and agree to accounts receivable subsidiary ledger. b. Review list of accounts written off during the year. c. Review schedule of d. Trace sales invoice and shipping documents just before year-end to customer accounts. |
|
Accrued Payroll |
Cut-off |
a. Review union agreements and recalculate the payroll expense based on the union wage rates. b. Perform analytical procedures comparing the current year payroll expense to the prior year. c. Review timecards for the period of one week before and after year-end and compare to management’s computation of wages not paid as of year-end. d. Compare the wages reported on form 941 to the IRS to wages indicated on the general ledger. |
|
Fixed Assets |
Valuation |
a. Compare the useful lives assigned to new fixed asset purchases to useful lives assigned in prior years to similar assets. b. Vouch new additions back to the invoices, cancelled check and properly approved purchase order. c. Trace fixed assets observed to the fixed asset master control listing. d. Interview the plant manager regarding repair and maintenance expenses. |
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