Explanation Review: The review is an inquiry of the financial statements of the company that follows an analytical procedure. It provides a moderate level of assurance because it only inquires the statement of the company. The risk of misstatement is moderate in the case of review. Further audit procedure: The further audit procedure is the stage to be performed while doing the risk assessment of misstatements. Further audit procedure includes substantive procedure which reconciles account balances of the financial statements. It also includes tests of control. Audit procedures : Audit procedures are the process of evaluating the quality of the financial information provided in the financial statements of the company. The audit procedure varies from company to company. It is a comparison of the financial and non-financial data of the clients. Valuation of the inventory: The inventory is valued at the lower of cost and Net Realized Value (NRV). Inventory valuation methods are used to determine the cost of the inventory. Various methods such as FIFO, LIFO and weighted average method are some valuation method. The valuation of the inventory is an important aspect as the change in the value of the inventory would lead to the misstatement in the financial statements of the company. The auditor should provide the quality check at the time of physical valuation to verify that the inventory only includes the appropriate inventory items. All the obsolete and scrapped items should not be included in the inventory as they do not carry the value. Callout list 1: Option c. should be written off as of year-end with a debit to the allowance for doubtful accounts and a credit to accounts receivable and we should perform further procedures on the adequacy of the allowance for doubtful accounts: The entry for the doubtful debts is necessary. The allowance method is being used for accounting of the bad debts. Further audit should be performed. Callout list 2: Option e. Line of credit: The current ratio gets increased due to a decrease in current liability. The current ratio is computed by dividing the current assets with the current liabilities. The software development cost and long-term debt are not included while computing the current ratio. The accounts receivable and the Cash-First National Bank result in an increase in current ratio if these are increased. Callout list 3: Option c. Equal or are less than current market prices: The recorded inventories cost price. The market price may exceed cost and it can be computed by using various factors. The recorded value must not exclude the market price of the items. Callout list 4: Option c. We should calculate turnover ratios of inventory items: The turnover rates can be low because of the obsolete nature of the inventory. The items which are slow-moving must not be recorded at zero. The inventory should be arithmetically correct and tested from time to time...

Principles Of Auditing & Other Assurance Services

21st Edition

ISBN: 9781259916984

Author: WHITTINGTON, Ray, Pany, Kurt

Publisher: Mcgraw-hill Education,

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Chapter 12, Problem 35OQ

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Review the documents and exhibits presented by the associates.

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Chapter 12, Problem 34EOQ

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Chapter 12 Solutions

Principles Of Auditing & Other Assurance Services

Ch. 12 - Prob. 1RQ Ch. 12 - Explain the significance of the purchase order to...Ch. 12 - What segregation of duties would you recommend to...Ch. 12 - Prob. 4RQ Ch. 12 - Prob. 5RQ Ch. 12 - Prob. 6RQ Ch. 12 - Prob. 7RQ Ch. 12 - Prob. 8RQ Ch. 12 - Prob. 9RQ Ch. 12 - When perpetual inventory records are maintained,...

Ch. 12 - What is meant by a bill and hold scheme?Ch. 12 - What charges and credits may be disclosed in the...Ch. 12 - Prob. 13RQ Ch. 12 - Prob. 14RQ Ch. 12 - A well-prepared balance sheet usually includes a...Ch. 12 - Darnell Equipment Company uses the LIFO method of...Ch. 12 - Prob. 17RQ Ch. 12 - Prob. 18RQ Ch. 12 - Prob. 19RQ Ch. 12 - Prob. 20RQ Ch. 12 - Prob. 21QRA Ch. 12 - Prob. 22QRA Ch. 12 - Prob. 23QRA Ch. 12 - Prob. 24QRA Ch. 12 - Prob. 25QRA Ch. 12 - Prob. 26QRA Ch. 12 - Prob. 27QRA Ch. 12 - Grandview Manufacturing Company employs standard...Ch. 12 - Prob. 29AOQ Ch. 12 - Prob. 29BOQ Ch. 12 - The document issued by a common carrier...Ch. 12 - Which of the following should be included as a...Ch. 12 - Prob. 29EOQ Ch. 12 - Prob. 29FOQ Ch. 12 - Instead of taking a physical inventory count on...Ch. 12 - Prob. 29HOQ Ch. 12 - Prob. 29IOQ Ch. 12 - Prob. 29JOQ Ch. 12 - Prob. 29KOQ Ch. 12 - Prob. 29LOQ Ch. 12 - Prob. 30OQ Ch. 12 - Adapted AICPA Task-Based Simulation For each of...Ch. 12 - Prob. 32OQ Ch. 12 - Prob. 33OQ Ch. 12 - Prob. 34AOQ Ch. 12 - Prob. 34BOQ Ch. 12 - Prob. 34COQ Ch. 12 - Prob. 34DOQ Ch. 12 - Prob. 34EOQ Ch. 12 - Prob. 35OQ Ch. 12 - Prob. 36P Ch. 12 - Prob. 37P Ch. 12 - Prob. 38P Ch. 12 - Prob. 39P Ch. 12 - Prob. 40P Ch. 12 - Prob. 41P Ch. 12 - Prob. 42P Ch. 12 - Prob. 43ITC Ch. 12 - Prob. 44EC Ch. 12 - Western Trading Company is a sole proprietorship...

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Review the documents and exhibits presented by the associates.

Solution Summary: The author recommends reviewing the documents and exhibits presented by the associates. The risk of misstatement is moderate in the case of review.

Review the documents and exhibits presented by the associates.

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Chapter 12 Solutions