Auditing and Assurance Services, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134075754
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 14, Problem 5RQ
To determine
Explain one test of control and one substantive test of transactions to verify the sales transaction-related audit objective:
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State one test of control and one substantive test of transactions that the auditor can use to verify the following sales transaction-related audit objective: Recorded sales are stated at the proper amounts.
List the transaction-related audit objectives for the audit of salestransactions. For each objective, state one internal control that the client can use toreduce the likelihood of misstatements
Indicate a specific audit procedure under each of the following categories, as applied particularly in the sales and collection cycle.a. test of controlb. substantive test of transactionsc. substantive test of account balances
Chapter 14 Solutions
Auditing and Assurance Services, Student Value Edition (16th Edition)
Ch. 14 - Describe the following documents and records and...Ch. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQ
Ch. 14 - Prob. 11RQCh. 14 - Prob. 12RQCh. 14 - Prob. 13RQCh. 14 - Prob. 14RQCh. 14 - Prob. 15RQCh. 14 - Prob. 16RQCh. 14 - Prob. 17RQCh. 14 - Prob. 18RQCh. 14 - Prob. 19.3MCQCh. 14 - Prob. 19.1MCQCh. 14 - Prob. 19.2MCQCh. 14 - Prob. 20.1MCQCh. 14 - Prob. 20.2MCQCh. 14 - Prob. 20.3MCQCh. 14 - An auditor is performing substantive tests of...Ch. 14 - Prob. 21.2MCQCh. 14 - Prob. 22.1MCQCh. 14 - Prob. 22.2MCQCh. 14 - Prob. 22.3MCQCh. 14 - Prob. 23DQPCh. 14 - Prob. 24DQPCh. 14 - Prob. 25DQPCh. 14 - Prob. 26DQPCh. 14 - Prob. 27DQPCh. 14 - Prob. 28DQPCh. 14 - Prob. 29DQPCh. 14 - Prob. 30DQPCh. 14 - Prob. 31DQPCh. 14 - Prob. 32DQPCh. 14 - Prob. 33DQPCh. 14 - Prob. 34CCh. 14 - Prob. 35ICA
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- Indicate whether each of the following audit procedures is a testof controls, a substantive test, or a dual-purpose test. Next, indicate the financial statement assertion most closely related to each audit procedure. Required:a. Vouch recorded sales invoices to supporting shipping documents.b. Inspect recorded sales invoices for credit approval.c. Vouch recorded sales invoices prices to the approved price list.d. Send confirmations to all customers regarding accounts receivable.e. Recalculate the arithmetic accuracy of the recorded sales invoices.f. Compare the shipment date of recorded sales invoices with the invoice record date.g. Trace recorded sales invoices to posting in the general ledger control account and in the correct customer’s account.h. Select a sample of shipping documents from the shipping department file and trace shipments to recorded sales invoices.i. Scan recorded sales invoices and shipping documents for missing numbers in sequence.j. Vouch sales invoices and…arrow_forwardWhich of the following audit procedures represent a substantive test of transaction that would validate managements assertion on occurrence of a purchase transaction a. Comparing the classification of the transaction based on the supplier's invoice with the company’s chart of accounts. b. Recalculation of the supplier's invoice to check its mathematical accuracy. c. Reviewing and scanning of the purchases journal for large or unusual amounts. d. Tracing from the file of receiving reports to the purchases journalarrow_forwardThe following questions concern types of audit tests.Choose the best response.a. The auditor looks for an indication on duplicate sales invoices to see whether theaccuracy of invoices has been verified. This is an example of(1) a test of details of balances. (3) a substantive test of transactions.(2) a test of control. (4) both a test of control and a substantivetest of transactions.arrow_forward
- Which of the following audit procedures is a dual-purpose test, which tests the effectiveness of internal controls as well as any material misstatements in the financial statements? A. The auditor accounts for the sequence of sales invoices. B. The auditor selects a sample of transactions in the sales journal and traces them to the relevant shipping documents. C. The auditor adds the transactions in the purchase journal and agrees to the total amount recorded in the general ledger. D. A test over the bank reconciliation. E. The auditor obtains a sample of timesheets for casual employees and checks for evidence of approval.arrow_forwardhe auditor of Kent Ltd selects a sample from the file of shipping documents in order to confirm that all sales shipped are invoiced and recorded in accounting records. This test will confirm:Select one:a. Valuation and allocation assertion for sales.b. Cut-off assertion for sales.c. Occurrence assertion for sales.d. Completeness assertion for sales.arrow_forwardof 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 →arrow_forward
- What three types of authorizations are commonly used as internalcontrols for sales? For each authorization, state a substantive test that the auditor coulduse to verify whether the control was effective in preventing misstatements.arrow_forwardDistinguish among tests of details of balances, tests of controls,and substantive tests of transactions for the sales and collection cycle. Explain how thetests of controls and substantive tests of transactions affect the tests of details of balances.arrow_forwardIn the audit of accounts receivable, the most important emphasis should be on thea. Completeness assertion.b. Existence assertion.c. Rights and obligations assertion.d. Presentation and disclosure assertionarrow_forward
- To gather audit evidence about the proper credit approval of sales (i.e., valuation assertion), the auditor would select a sample of documents from the population represented by the a. Subsidiary customers' accounts ledger. b. Sales invoice file. c. Bill of lading file. d. Customer order file.arrow_forwardWhen an audit team traces a sample of shipping documents to the related sales invoice copies, they are trying to find relevant evidence thata. Shipments to customers were invoiced.b. Shipments to customers were recorded as sales.c. Recorded sales were shipped.d. Invoiced sales were shipped.arrow_forward1. For each of the following audit procedures, identify A- the type of audit evidence and B- the related audit objective. a. Ask the accounts payable clerk about procedures for verifying prices, quantities, and extensions on vendors’ invoices – b. Vouch entries in sales journal to sales invoices and related shipping documents. – c. Examine the footnotes about the company’s policies for recording revenue transactions to determine whether the disclosures are reasonable d. Examine expense voucher packages and related vendors’ invoices for approval of expense account classification. e. Add the sales journal for the month of July and trace amounts to the general ledger f. Compare the quantities on hand and unit prices on this year’s inventory count sheets with those in the preceding year as a test for large differences. g. Test the extension of unit prices times quantity on the inventory list for a sample of items, test foot the list, and compare the total to the general ledger. h. Trace…arrow_forward
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