AUDITING+ASSURANCE 12MONTH ACCESS CARD
17th Edition
ISBN: 9780135635131
Author: ARENS
Publisher: WILEY
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Question
Chapter 18, Problem 30C
I.
To determine
Present a sampling spreadsheet for the audit program.
I.
Expert Solution

Explanation of Solution
Spreadsheet to be used under audit program to check the accounts payables, cash disbursements, and acquisition of inventories:
Planned audit | Actual Results | ||||||||
Procedure | Description of attributes | EPER | TER | ARO | Initial | Sample size | Exceptions | SER | (TER-SER) |
1 | Totals disbursement & acquisition journals does not match general journal | 0 | 5 | m | 2 | 2 | 0 | 0 | 5 |
2 | Unusual entries having errors | 0 | 5 | m | 10 | 10 | 1 | 10 | -5 |
3 | Cash disbursement in book not matching with bank | 0 | 5 | m | 50 | 50 | 3 | 6 | -1 |
7 | Checks not mailed under authorization | 1 | 6 | m | 20 | 20 | 0 | 0 | 6 |
9a | cancelled checks not matching with entries and signatures | 0 | 5 | m | 20 | 20 | 1 | 5 | 0 |
In relation with supplier invoice, purchase order and receiving reports | |||||||||
9b 1 | supporting documents not attached to supplier invoice | 0 | 5 | m | 30 | 30 | 4 | 13 | -8 |
9b 2 | Documents not matching cash disbursement journals | 0 | 5 | m | 30 | 30 | 2 | 7 | -2 |
9b 3 | Particulars of suppliers not matching with entries | 0 | 5 | m | 30 | 30 | 2 | 7 | -2 |
9b 4 | discounts are not obtained when appropriate | 0 | 5 | m | 10 | 10 | 1 | 10 | -5 |
9b 5 | Suppliers invoice not internally verified | 0 | 5 | m | 30 | 30 | 2 | 7 | -2 |
9b 6 | Cash disbursements is not reasonable to account codes | 0 | 5 | m | 30 | 30 | 2 | 7 | -2 |
9b 7 | invoices are not approved | 0 | 5 | m | 10 | 10 | 1 | 10 | -5 |
9b 8 | purchase orders/requisitions are not approved | 0 | 5 | m | 10 | 10 | 1 | 10 | -5 |
9b 9 | Prices are not adequately charged | 0 | 5 | m | 30 | 30 | 0 | 0 | 5 |
9b 10 | Quantities and description does not tally in documents | 0 | 5 | m | 30 | 30 | 1 | 3 | 2 |
9b 11 | Invoices are not marked paid and check numbers are not included while signing checks | 0 | 5 | m | 30 | 30 | 2 | 7 | -2 |
9c | Entries in cash disbursement journals are not matching with the accounts payable master file | 0 | 5 | m | 30 | 30 | 1 | 3 | 2 |
In relation to receiving report, suppliers invoice, and acquisition journal | |||||||||
10a | Supplier's name, receipt date, quantity, price, and type are not matching | 0 | 5 | m | 30 | 30 | 2 | 7 | -2 |
10b | Check number for paid transactions in acquisition journal does not tally with the cash disbursement journals | 0 | 5 | m | 30 | 30 | 3 | 10 | -5 |
10b | Reasons for not making the payment to the unpaid accounts are not valid | 0 | 5 | m | 10 | 10 | 1 | 10 | -5 |
Table (1)
Following procedures are not included in the spreadsheet since sampling is not applicable to these procedures:
- Procedure to check whether bank reconciliation is prepared by the controller.
- Procedure to check whether balances in accounts payable and master file are periodically reconciled to vendors' statement.
- Procedure to check whether controller balances the accounts payable to the general ledger every month.
- Procedure to check whether numerical sequence of check is accounted and prepared by separate individuals
Abbreviations used in the spreadsheet are listed as follows:
- EPER: Estimated population exception rate. Exceptions that auditor expects to be present before undertaking any procedures.
- TER: Tolerable exception rate. Exception up to this rate is assessed as tolerable by the auditor.
- ARO: Acceptable risk of overreliance. It is considered as medium (m) for all the procedures. It is the level of risk that auditor assumes for evaluating the controls as effective or for assessing the risk as tolerable, when the exceptions are higher than the tolerable rate.
- SER: Sample exception rate. It is the exception demonstrated in percentage form. It is computed by dividing exceptions by the total sample size.
- TER-SER: It is the excess of tolerable risk over the exception rate. For example, if tolerable rate is 5% and exceptions found is 3% than it shows that tolerable rate is 2% higher than the actual deviation which is a favorable situation.
II.
a.
To determine
Present a sampling spreadsheet for the audit program.
II.
a.
Expert Solution

Explanation of Solution
Spreadsheet to be used under audit program to check the accounts payables, cash disbursements, and acquisition of inventories:
Planned audit | Actual Results | ||||||||
Procedure | Description of attributes | EPER | TER | ARO | Initial Sample Size | Sample size | Exceptions | SER | (TER-SER) |
1 | Totals disbursement & acquisition journals does not match general journal | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
2 | Unusual entries having errors | 0 | 5 | m | 50 | 50 | 2 | 4 | 1 |
3 | Cash disbursement in book not matching with bank | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
7 | Checks not mailed under authorization | 1 | 6 | m | 50 | 50 | 0 | 0 | 6 |
9a | cancelled checks not matching with entries and signatures | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
In relation with supplier invoice, purchase order and receiving reports | |||||||||
9b 1 | supporting documents not attached to supplier invoice | 0 | 5 | m | 50 | 50 | 2 | 4 | 1 |
9b 2 | Documents not matching cash disbursement journals | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9b 3 | Particulars of suppliers not matching with entries | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9b 4 | discounts are not obtained when appropriate | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9b 5 | Suppliers invoice not internally verified | 0 | 5 | m | 50 | 50 | 4 | 8 | -3 |
9b 6 | Cash disbursements is not reasonable to account codes | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9b 7 | invoices are not approved | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9b 8 | purchase orders/requisitions are not approved | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9b 9 | Prices are not adequately charged | 0 | 5 | m | 50 | 50 | 1 | 2 | 3 |
9b 10 | Quantities and description does not tally in documents | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9b 11 | Invoices are not marked paid and check numbers are not included while signing checks | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
9c | Entries in cash disbursement journals are not matching with the accounts payable master file | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
In relation to receiving report, suppliers invoice, and acquisition journal | |||||||||
10a | Supplier's name, receipt date, quantity, price, and type are not matching | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
10b | Check number for paid transactions in acquisition journal does not tally with the cash disbursement journals | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
10b | Reasons for not making the payment to the unpaid accounts are not valid | 0 | 5 | m | 50 | 50 | 0 | 0 | 5 |
Table (2)
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Chapter 18 Solutions
AUDITING+ASSURANCE 12MONTH ACCESS CARD
Ch. 18 - List five asset accounts, three liability...Ch. 18 - Prob. 2DQPCh. 18 - Prob. 3DQPCh. 18 - Prob. 4DQPCh. 18 - Prob. 5DQPCh. 18 - Prob. 6DQPCh. 18 - Prob. 7DQPCh. 18 - Prob. 8DQPCh. 18 - Prob. 9DQPCh. 18 - Prob. 10DQP
Ch. 18 - Prob. 11DQPCh. 18 - Prob. 13DQPCh. 18 - Prob. 14DQPCh. 18 - Prob. 15DQPCh. 18 - Prob. 16.1MCQCh. 18 - Prob. 16.2MCQCh. 18 - Prob. 16.3MCQCh. 18 - Prob. 17.1MCQCh. 18 - Prob. 17.2MCQCh. 18 - Prob. 17.3MCQCh. 18 - Prob. 18.1MCQCh. 18 - Prob. 18.2MCQCh. 18 - Prob. 18.3MCQCh. 18 - Prob. 19DQPCh. 18 - Prob. 20DQPCh. 18 - Prob. 21DQPCh. 18 - Prob. 22DQPCh. 18 - The following misstatements are included in the...Ch. 18 - Prob. 24DQPCh. 18 - Prob. 25DQPCh. 18 - Prob. 26DQPCh. 18 - Prob. 27DQPCh. 18 - Prob. 28DQPCh. 18 - Prob. 30C
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