EBK AUDITING+ASSURANCE SERVICES
17th Edition
ISBN: 9780135171219
Author: ARENS
Publisher: PEARSON CO
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Chapter 12, Problem 7RQ
To determine
Identify the extent up to which an auditor can rely on the audit of prior years.
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Students have asked these similar questions
During the prior-year audits of McKimmon, Inc., a privatecompany, the auditor did tests of controls for all relevant financial statement assertions.Some of the related controls are manual while others are automated. Describe the extentthe auditor can rely on tests of controls performed in prior years.
The auditors have determined that each of the following objectives will be a part of the audit of SSC Corporation. While several procedures will ordinarily address an audit objective, select the procedure most directly related to the audit objective. Each procedure may be used once, more than once, or not at all.
1.
All receivables that should be recorded are recorded as of year-end.
2.
Recorded receivables are at appropriate net realizable values.
3.
Recorded receivables exist.
4.
The client has rights to recorded year-end receivables.
5.
The presentation and disclosure of receivables are adequate.
Trace a sample of sales invoiced from late in December to the sales journal and to postings in accounts receivable and sales amounts.
Review the aged trial balance for significant past due accounts.
Review board of director minutes and underlying contracts and sales terms with customers.
Vouch year-end accounts…
After a preliminary review of the clients, revenue and receipt transaction cycle, the
auditor assessed the preliminary audit risk at a high level, which of the following
additional procedures would the auditor most likely perform next: *
a. Obtain evidence about the consistency of the application of the client's internal control
procedures.
b. Increase the overall audit materiality level.
c. Perform extensive analytical procedures as substantive test at year-end.
d. Increase the volume of evidence that will satisfy the auditor's sufficiency criteria.
e. None of the above
Chapter 12 Solutions
EBK AUDITING+ASSURANCE SERVICES
Ch. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Describe how the nature of evidence used to...Ch. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - Prob. 15RQCh. 12 - Prob. 16.1MCQCh. 12 - Prob. 16.2MCQCh. 12 - Prob. 16.3MCQCh. 12 - Prob. 17.1MCQCh. 12 - Prob. 17.2MCQCh. 12 - Prob. 17.3MCQCh. 12 - Prob. 18.1MCQCh. 12 - Prob. 18.2MCQCh. 12 - Prob. 18.3MCQCh. 12 - Prob. 19.1MCQCh. 12 - Prob. 19.2MCQCh. 12 - Prob. 19.3MCQCh. 12 - Prob. 20DQPCh. 12 - Prob. 21DQPCh. 12 - Prob. 22DQPCh. 12 - Prob. 23DQPCh. 12 - Prob. 24DQPCh. 12 - Prob. 25DQPCh. 12 - Prob. 26DQPCh. 12 - Prob. 27DQPCh. 12 - A CPAs client, Boos Baumkirchner, Inc., is a...Ch. 12 - Prob. 29DQPCh. 12 - Prob. 30DQPCh. 12 - Based on a cost-benefit analysis, management at...Ch. 12 - Prob. 32DQPCh. 12 - Prob. 33DQPCh. 12 - Prob. 34DQP
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- The main purpose of the auditor's consideration of internal control for a non-SEC client is to A. Develop suggestions for improvements in internal control. C. timing Determine the nature, timing, and extent of substantive tests. C. Express an opinion on the financial statements. D. Determine whether fraud has occurred during the year under audit.arrow_forwardThe auditors use an analytical procedures during the course of an audit. The most important phase of performing these procedures is the: Vouching of all data supporting various rates, Investigation of significant variations and unusual relationships, Comparison of client-computed statistics with industry data on a quarterly and full-year basisarrow_forwardWorking papers document the audit evidence collected by the auditors during the financial statement audit. The lead schedule for accounts payable will appear at the beginning of the accounts payable section of the audit file. Which of the following would be included on the lead schedule? (Several choices may be correct.) ✔ Pre-adjusted current year's balance and prior year's balance ☐ Details of transactions tested for payables ☐ Conclusion reached on the overall opinion of the balance in accounts payable ✓ Agreement of current year's balance to payables balance on trial balance ✓ Difference between pre-adjusted balance and prior year balance ☐ Documentation showing the vouching of specific accounts payable balancesarrow_forward
- The preparation of audit documentation is an integral part of an auditor’s examination of financial statements. On a recurring engagement, auditors review the audit plans and audit documentation from the prior audit while planning the current audit to determine their usefulness for the current-year work.Required:a. (1) What are the purposes or functions of audit documentation? (2) What records may be included in audit documentation?b. What factors affect the auditors’ judgment of the type and content of the audit documentation for a particular engagement?c. What should be included in audit documentation to support auditors’ compliance with generally accepted auditing standards?d. How can auditors make the most effective use of the prior-year audit plans in a recurring audit?arrow_forwardDuring the most recent year's audit of Hoover Enterprises, senior management has advised the auditors that a new and more effective system of internal control has been designed and implemented by external consultants and the internal audit function. As a result of this information, what approach might the auditing firm take with respect to internal control? O The external auditors will be required to obtain written assurances from senior management, documenting the effectiveness of the new system of internal control, for inclusion in the audit file. O The auditor is likely to proceed with testing of the new controls, and if the new system is determined to be robust and effective, the auditor will issue a qualified opinion on internal control. O The auditor may presume that their previous understanding of internal control is no longer valid, and will likely amend audit procedures to document the effectiveness of the new system. O The external auditors will focus the audit time and…arrow_forwardElizabeth Johnson, CPA, has completed the audit of notespayable and other liabilities for Valley River Electrical Services and now plans to auditcontingent liabilities and commitments.a. Distinguish between contingent liabilities and commitments and explain why bothare important in an audit.b. Identify three useful audit procedures for uncovering contingent liabilities thatJohnson will likely perform in the normal conduct of the audit, even if she had noresponsibility for uncovering contingencies.c. Identify three other procedures Johnson is likely to perform specifically for the purpose of identifying undisclosed contingencies to help her obtain evidence about thecompleteness presentation and disclosure objective.arrow_forward
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