Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Question
Chapter 6, Problem 26MCQ
To determine
Introduction: Audit evidence is the proof that an auditor tries to seek from an organization in order to claim that the assertions related to financial transactions are correct.
The source of evidence for a given situation that an auditor will find most reliable.
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In evaluating the fair value of net assets in an acquisition the auditor has to gather independent
evidence in deciding whether the assessed values are appropriate. Which of the following is not one of
the steps the auditor normally would perform in making that assessment?
Evaluate the qualifications of the specialist.
O Determine their independence from the client.
Make the valuations themselves.
O Review methodology.
The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal. This audit procedure primarily tests which of the following assertions for the equipment account?
a. Presentation and disclosure.
b. Rights.
c. Valuation.
d. Existence.
In testing the existence assertion for an asset, an auditor ordinarily works from the
a. Potentially unrecorded items to the financial statements.
O b. Financial statements to the potentially unrecorded items.
O c. Supporting evidence to the accounting records.
O d. Accounting records to the supporting evidence.
Chapter 6 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 6 - Prob. 1TFQCh. 6 - Prob. 2TFQCh. 6 - Prob. 3TFQCh. 6 - Prob. 4TFQCh. 6 - Prob. 5TFQCh. 6 - Prob. 6TFQCh. 6 - Prob. 7TFQCh. 6 - Prob. 8TFQCh. 6 - Prob. 9TFQCh. 6 - Prob. 10TFQ
Ch. 6 - Prob. 11TFQCh. 6 - Prob. 12TFQCh. 6 - Prob. 13TFQCh. 6 - Prob. 14TFQCh. 6 - Prob. 15TFQCh. 6 - Prob. 16TFQCh. 6 - Prob. 17TFQCh. 6 - Prob. 18TFQCh. 6 - Prob. 19TFQCh. 6 - Prob. 20TFQCh. 6 - Prob. 21MCQCh. 6 - Prob. 22MCQCh. 6 - Prob. 23MCQCh. 6 - Prob. 24MCQCh. 6 - Prob. 25MCQCh. 6 - Prob. 26MCQCh. 6 - Prob. 27MCQCh. 6 - Prob. 28MCQCh. 6 - Prob. 29MCQCh. 6 - Prob. 30MCQCh. 6 - Prob. 31MCQCh. 6 - Prob. 32MCQCh. 6 - Prob. 33MCQCh. 6 - Prob. 34MCQCh. 6 - Prob. 35MCQCh. 6 - Prob. 36MCQCh. 6 - Prob. 37MCQCh. 6 - Prob. 38MCQCh. 6 - Prob. 39MCQCh. 6 - Prob. 40MCQCh. 6 - Prob. 41RSCQCh. 6 - Prob. 42RSCQCh. 6 - Prob. 43RSCQCh. 6 - Prob. 44RSCQCh. 6 - Refer to Exhibit 6.2 and describe the differences...Ch. 6 - Prob. 46RSCQCh. 6 - Prob. 48RSCQCh. 6 - Prob. 49RSCQCh. 6 - Prob. 50RSCQCh. 6 - Prob. 51RSCQCh. 6 - Prob. 52RSCQCh. 6 - Prob. 53RSCQCh. 6 - Indicate how the auditor could use substantive...Ch. 6 - Prob. 55RSCQCh. 6 - Prob. 56RSCQCh. 6 - Prob. 57RSCQCh. 6 - Prob. 58RSCQCh. 6 - Prob. 59RSCQCh. 6 - Prob. 60RSCQCh. 6 - Prob. 61RSCQCh. 6 - Prob. 62RSCQCh. 6 - Prob. 63RSCQCh. 6 - Prob. 64RSCQCh. 6 - Prob. 65RSCQCh. 6 - Prob. 66RSCQCh. 6 - Prob. 67RSCQCh. 6 - Prob. 68RSCQCh. 6 - Prob. 69FFCh. 6 - Prob. 70FFCh. 6 - Prob. 71FFCh. 6 - Prob. 72FFCh. 6 - MINISCRIBE (LO 1, 2) As reported in the Wall...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? A. Are depreciation policies in accordance with applicable financial reporting framework? B. Are disposals of PPE properly utilized, removed from records including depreciation, and recorded in correct accounting period? C. All of the choices D. Are all PPE , including finance leases, properly authorized, recorded in accordance with the capitalization threshold (ex. 10,000) and in correct accounting period?arrow_forwardWhich of the following audit procedures will apply to obtain the reliable audit evidence relating to the existence of tangible assets? O a. Reperformance O b. Confirmation O c. Inspection O d. Recalculationarrow_forwardIn the audit of the financial statements, to determine the risks of material misstatement when planning the audit of the tangible fixed assets item, what types of information must the auditor collect? List audit procedures (at least 4 procedures) to collect sufficient and appropriate evidence as a basis for confirmation of tangible fixed assets.arrow_forward
- When auditing the existence assertion for an asset, auditors proceed from thea. Financial statement amounts back to the potentially unrecorded items.b. Potentially unrecorded items forward to the financial statement amounts.c. General ledger back to the supporting original transaction documents.d. Supporting original transaction documents to the general ledger.arrow_forward1. Of the following assertions, which is generally considered a particularly high risk for self-constructed fixed assets? a. Completeness b. Presentation c. Ownership (rights) d. Valuation 2. Which of the following types of fixed assets is considered to have higher inherent risk? a. Leased fixed assets b. Purchased equipment c. Vehicles d. Purchased buildings 3. Which of the following is the usual audit procedure for testing the existence assertion for fixed assets? a. Vouching a sample of additions to fixed assets made during the fiscal year being audited, to supporting vendor invoices. b. Vouching a sample of deletions of fixed assets made during the fiscal year being audited and prior years, to supporting vendor invoices. c. Tracing a sample of vendor invoices to debits to fixed assets during the fiscal year being audited. d. Substantive analytical procedures 4. An auditor has been assigned to audit the existence assertion for fixed assets. The auditor (a Mercer graduate) should…arrow_forwardWhich of the following best describes the independent auditor's approach to obtaining satisfaction concerning depreciation expense in the income statement? a.Review the mathematical accuracy of the amounts charged to income as a result of depreciation expens b.Determine the method of computing depreciation expense and ascertain that it is in accordance with generally accepted accounting principle c.Support the basis of depreciable assets and the depreciation expens d.Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation account e.Select a sample of equipment items in the manufacturing facility and vouch back to the recorded subsidiary ledge r.s.e.s.e.ry ledger.arrow_forward
- What assertions found in PP&E, investments, and intangibles accounts are of interest to an auditor during the examination of the expenditure and acquisition cycle?arrow_forward12. When auditing' intangible assets, the auditor would likely recomputed amortization and determine whether management's recorded amount is reasonable. When performing this procedure which assertion is the auditor primarily gathering evidence for? a. Completeness b. Existence c. Valuation d. Rights and obligations.arrow_forwardThe auditing procedure that could least likely lead the auditor to find unrecorded property, plant, and equipment disposals isA. Vouching purchase invoices for asset additions.B. Review of voucher for the payment of property taxes.C. Review of miscellaneous income accountD. Review of loan agreement for fixed assets used as collateralE. None of themarrow_forward
- In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? A. Are all property, plant and equipment purchases, including finance leases, properly authorized, recorded in accordance with the capitalization threshold (e.g., P10,000) and in correct accounting period? B. Are depreciation policies in accordance with applicable financial reporting framework? C. All of the choices. D. Are disposals of property, plant and equipment properly authorized, removed from records including depreciation, and recorded in correct accounting period?arrow_forwardIn auditing depreciation expense, what major considerationsshould the auditor keep in mind? Explain how each can be verifiedarrow_forwardListed below are several of the auditors’ general objectives in performing substantive procedures on an asset account: Establish the existence of assets. Establish that the company has rights to the assets. Establish the completeness of recorded assets. Verify the cutoff of transactions. Determine the appropriate valuation of the assets. Establish the clerical accuracy of the underlying records. Determine the appropriate financial statement presentation and disclosure of the assets. Required: Indicate the general objective (or objectives) of each of the following audit procedures: a. Observe the client’s physical inventory. b. Locate on the client’s premises a sample of the equipment items listed in the subsidiary plant and equipment ledger. c. Obtain a listing of inventory and reconcile the total to the general ledger. d. Trace a sample of shipping documents to recorded sales transactions. e. Identify related parties. f. Vouch selected purchases of…arrow_forward
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