AUDITING LL W/ CONNECT <C>
11th Edition
ISBN: 9781307416268
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 13.30P
To determine
Concept Introduction:
An analytical procedure is a part of
To describe:The substantive analytical procedures that may consider with computerized audit software with respect to inventory
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
As you are planning the annual audit of Norton Corporation, you note that the company has a number of user operated computers in use in various locations. One of the machines has been installed in the stores department, which has the responsibility for disbursing stock items and for maintaining stores records. In your audit, you find that one employee receives the requisitions for stores, disburses the stock, maintains the records, operates the computer, and authorizes adjustments to the total amounts of stock recorded by the computer.
When you discuss the applicable controls with the department manager, you are told that the user operated computer is assigned exclusively to that department. Therefore, the manager contends that it does not require the same types of controls applicable to large IT systems.
a. Comment on the manager’s contention.
Johnny Kang, CPA, is the auditor of the Felix Lee Ltd. Johnny Kang, CPA is considering the audit work to be performed in the accounts payable area for the current year’s engagement. The prior year papers show that confirmation requests were mailed to one hundred of the client’s one thousand suppliers. The selected suppliers were based on Johnny Kang’s sampling, which was designed to select high value items in the accounts payable balance. Johnny Kang and Felix Lee Ltd.’s accountant, DY Anderson spent substantial number of hours resolving relatively minor differences between the confirmation replies and accounting records. Alternative audit procedures were used for those suppliers who did not respond to the confirmation requests.
Required:1. Identify the accounts payable assertions that Johnny Kang must consider in determining the substantive tests to be followed.
2. Identify situations for which Johnny Kang should use accounts payable confirmations and discuss whether he is required to…
You are auditing a client that supplies electrical products to retail stores and electrical contractors throughout the country.The client keeps its accounts receivable records on a computer system, which is updated at the end of each business day.You plan to audit accounts receivable balance as at the end of the financial year, and you have a generalised audit software (GAS) package available to help in this task.Required:Identify ten (10) substantive audit procedures that you could perform using generalised audit software (GAS) in relation to auditing the accounts receivable account.
Chapter 13 Solutions
AUDITING LL W/ CONNECT <C>
Ch. 13 - Prob. 13.1RQCh. 13 - Prob. 13.2RQCh. 13 - Prob. 13.3RQCh. 13 - Prob. 13.4RQCh. 13 - Prob. 13.5RQCh. 13 - Prob. 13.6RQCh. 13 - Prob. 13.7RQCh. 13 - Prob. 13.8RQCh. 13 - Prob. 13.9RQCh. 13 - Prob. 13.10RQ
Ch. 13 - Prob. 13.11RQCh. 13 - Prob. 13.12RQCh. 13 - Prob. 13.13RQCh. 13 - Prob. 13.14MCQCh. 13 - Prob. 13.15MCQCh. 13 - Prob. 13.16MCQCh. 13 - Prob. 13.17MCQCh. 13 - Prob. 13.18MCQCh. 13 - Prob. 13.19MCQCh. 13 - Prob. 13.20MCQCh. 13 - Prob. 13.21MCQCh. 13 - Prob. 13.22MCQCh. 13 - Prob. 13.23MCQCh. 13 - Prob. 13.24MCQCh. 13 - Prob. 13.25MCQCh. 13 - Prob. 13.26MCQCh. 13 - Prob. 13.27PCh. 13 - Prob. 13.28PCh. 13 - Prob. 13.29PCh. 13 - Prob. 13.30PCh. 13 - Prob. 13.31PCh. 13 - Prob. 13.32P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- A division of your company purchased a large quantity of new desktop computers during the current fiscal year. An internal audit manager has asked you to audit the process used to acquire the computers. He also wants you to determine whether the computers have been used properly and accounted for correctly. The manager specified a set of audit objectives to guide your tests. For example, he wants you to determine whether: (1) The purchases of the computers were properly authorized. (2) Responsibilities regarding the computers were properly segregated. (3) The computers, as well as the software and information they contain, are properly safeguarded. Consider both physical and logical access。 (4) Laws and regulations regarding software usage have been complied with. (5) The computers recorded as being purchased actually exist. (6) All of the computers that were purchased have been recorded. (7) The amounts at which the computers are recorded are correct. (8) The estimated useful lives…arrow_forwardConsider the following independent situations, each of which applies to an audit of a client for the year ending 30th June 2019. XYZ Ltd is a large machinery manufacturer that uses business-to business e-commerce to transmit purchase orders to its many suppliers. Each supplier electronically transmits an invoice, which is credited directly to the accounts payable file. The goods usually take one or two weeks to arrive. Once they have been received, a goods received notes is raised by XYZ and matched with the supplier’s invoice, and payment is authorised. Spiral Ltd’s credit officer, whose prime responsibility was setting and reviewing customers’ credit limits, retired during the year. The position has remained unfilled for six months, as no suitably qualified and experienced replacement has yet not been found. Kent Ltd failed to discover an employee fraud on a timely basis because bank reconciliations were not being done each month. Required: For each of the above situations: What…arrow_forwardABC Manufactures is a manufacturing company, and your audit team is conducting the annual audit of its financial statements. As part of the audit procedures, you are tasked with testing the accounts receivable balance. ABC Manufactures has a significant accounts receivable balance owing to its diverse customer base. Upon initiating the audit procedures, your team sends out accounts receivable confirmations to one of ABC Manufactures largest customers with a material accounts receivable balance outstanding. However, several weeks have passed, and the confirmation has not been returned. The audit team has made follow-up attempts via phone calls and emails, but there has been minimal response. Considering the lack of responsiveness, the audit team is becoming increasingly skeptical about the effectiveness of the confirmation process in this particular situation. Describe two alternative audit procedures that the audit team may conduct that may assist them in gathering sufficient…arrow_forward
- You have accepted the engagement of auditing the financial statements of the C. Reis Company, a small manufacturing firm that has been your client for several years. Because you were busy writing the report for another engagement, you sent a staff accountant to begin the audit with the suggestion that she start with accounts receivable. Using the prior year’s audit documentation as a guide, she prepared a trial balance of the accounts, aged them, prepared and mailed positive confirmation requests, examined underlying support for charges and credits, and performed other work she considered necessary to obtain evidence about the validity and collectability of the receivables. At the conclusion of her work, you reviewed the audit documentation she prepared and found she had carefully followed the prior year’s audit documentation.Required:The opinion rendered by auditors states that the audit was made in accordance with generally accepted auditing standards. Identify the important…arrow_forwardRichard Foster, an assistant auditor, was assigned to the year-end audit work of Sipher Corporation. Sipher is a small manufacturer of language translation equipment. As his first assignment, Foster was instructed to test the cutoff of year-end sales transactions. Because Sipher uses a calendar year-end for its financial statements, Foster began by obtaining the computer-generated sales ledgers and journals for December and January. He then traced ledger postings for a few days before and after December 31 to the sales journals, noting the dates of the journal entries. Foster noted no journal entries that were posted to the ledger in the wrong accounting period. Thus, he concluded that the client’s cutoff of sales transactions was effective. Please explain the validity of Foster’s conclusion.arrow_forwardYou are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance. Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…arrow_forward
- During the audit of Company XYZ, John Doe, the plant manager tells you that the company purchased and an equipment at the beginning of the year that is currently being used in the factory. The equipment was recorded at cost. The manager asks you, now that we are using the machine in our production do we need to any additional accounting for the machine? Using the related GAAP and prepare a memo to the president that summarizes how to record, and the machine used in the factory.arrow_forwardVarious Completion Matters. For each of the following independent situations, describe the most appropriate course of action that the auditors should take.a. Drew Allison is conducting the audit of Anderson Inc. as of December 31, 2017. At the beginning of the evidence gathering, Allison becomes aware that one of Anderson’s major customers (Jones) is experiencing significant financial difficulties. Jones normally accounts for 5 percent of Anderson’s net sales. After performing the necessary procedures, Allison believes that $2.8 million of Jones’s receivable balance will ultimately become uncollectible. Allison further believes this amount is material to Anderson’s financial condition and results of operations.b. Nagan Carmelo is completing the December 31, 2017, audit of Nugget Company. As part of the final procedures, Carmelo has requested representations from Nugget’s management regarding their assertion as to the fairness of the financial statements and other important matters…arrow_forwardYou have been assigned to the audit of Carter Brandon Co (CBC), and you are drafting the audit for payables and accruals for the year ended 31 December 20x7. The company operates from a site in West Wendon. All raw materials are received in the stores and all deliveries are checked to the delivery note and purchase order. The stores supervisor raises a goods received note and is also responsible for raising credit requests if there are any problems with the raw materials delivered.When the purchase ledger department staff receive the purchase invoices, they match them to the relevant goods received notes and purchase orders, and post them to the computerised purchase ledger. Suppliers are paid on the last day of each month. Other payables and accruals consist of tax, wages and other statutory deductions, accruals and time- apportioned expenses such as electricity and telephone.a. Assess the audit work you will carry out to compare suppliers' statements with balances recorded on the…arrow_forward
- Consider the following independent situations, all of which apply to audits of entities for the year ended 31 December 2019: In July 2019, Alpha Ltd started using a new general ledger software package. The Financial Controller is impressed with the new system, because management accounts are easily produced and allow detailed comparisons with budgets and prior-period figures across product lines and geographical areas. The conversion to the new system went smoothly. As it is a popular computer package, it required only minor As part of a computer systems conversion in Beta Ltd, the position of Systems Administrator was created. This position is responsible for all systems maintenance, including data backups and modifications. These tasks were previously the responsibility of the Gamma Ltd is a large supermarket chain with outlets in all major cities in the country. In August 2019 Gamma Ltd contracted out its payroll data processing in each city to an independent computer…arrow_forwardYou are the supervisor accountable for the audit of Kicap Manis Berhad, a listed agency, for the 12 months ended 31 December 2019. The major enterprise activity of Kicap Manis Berhad is the manufacture of farm machinery. The audit paintings has been completed, and you are reviewing the operating papers in order to draft a file to those charged with governance. during the audit of property, plant and gadget (PPE), the audit team located no cloth misstatement but the subsequent issues have come to your interest. It changed into found that authorization had not been won for the buy of office equipment with a fee of RM315,000. The officer in rate of the buy claimed that the management has conveyed their settlement with the buy in the management team month-to-month meeting, but the audit team has now not been provided with such mins of assembly even after numerous requests. The purchaser is the use of an internally evolved PPE gadget, PropertyCare, to hold the records of the PPE. It became…arrow_forwardFor the audit of Carbald Supply Company, CaroleWever, CPA, is conducting a test of sales for 9 months of the year ended December 31,2013. Included among her audit procedures are the following:1. Foot and cross-foot the sales journal and trace the balance to the general ledger.2. Review all sales transactions for reasonableness.3. Select a sample of recorded sales from the sales journal and trace the customername and amounts to duplicate sales invoices and the related shipping document.4. Select a sample of shipping document numbers and perform the following tests:a. Trace the shipping document to the related duplicate sales invoice.b. Examine the duplicate sales invoice to determine whether copies of the shippingdocument, shipping order, and customer order are attached.c. Examine the shipping order for an authorized credit approval.d. Examine the duplicate sales invoice for an indication of internal verificationof quantity, price, extensions, footings, and trace the balance to the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning