Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 6, Problem 32DQP
To determine
Identify the appropriate management assertion.
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The following are specific balance-related audit objectives applied to the audit of accounts receivable (a. through i.) and management assertions about account balances (1 through 6). The list
referred to in the specific balance-related audit objectives is the list of the accounts receivable from each customer at the balance sheet date.
i (Click the icon to view the audit objectives.)
i (Click the icon to view the management assertions.)
Requirement
For each specific balance-related audit objective, identify the appropriate management assertion. (Hint: See table.)
Specific balance-related audit objective
There are no unrecorded receivables.
b. Uncollectible accounts have been provided for.
C. Receivables that have become uncollectible have been written off.
d.
All accounts on the list are expected to be collected within 1 year.
The total of the amounts on the accounts receivable listing agrees with the
general ledger balance for accounts receivable.
a.
e.
Management assertion
The following are two specific balance-related audit objectives inthe audit of accounts payable. The list referred to is the list of accounts payable takenfrom the accounts payable master file. The total of the list equals the accounts payablebalance on the general ledger.1. All accounts payable included on the list represent amounts due to valid vendors.2. There are no unrecorded accounts payable.a. Explain the difference between these two specific balance-related audit objectives.b. Which of these two specific balance-related audit objectives applies to the generalbalance-related audit objective of existence, and which one applies to completeness?c. For the audit of accounts payable, which of these two specific balance-related auditobjectives is usually more important? Explain
The following are two specific audit objectives in the audit of accounts payable. The list referred to is the list of accounts payable taken from the accounts payable subsidiary record. The total amount in the list agrees with the accounts payable balance in the general ledger. What is the emphasis of the auditor in the following audit procedures?
Group of answer choices
1. All accounts payable included in the list represent amounts due to valid vendors.
a. emphasis on possible overstatement
b. emphasis on possible understatement
2. There are no unrecorded accounts payable.
a. emphasis on possible overstatement
b. emphasis on possible understatemen
Chapter 6 Solutions
Auditing And Assurance Services
Ch. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - What are the six elements of professional...Ch. 6 - What are the five elements of an effective...Ch. 6 - Describe two of the more common judgment traps and...
Ch. 6 - Identify the cycle to which each of the following...Ch. 6 - Why are sales, sales returns and allowances, bad...Ch. 6 - Prob. 13RQCh. 6 - Prob. 14RQCh. 6 - Prob. 15RQCh. 6 - Prob. 16RQCh. 6 - Prob. 17RQCh. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - Prob. 20RQCh. 6 - Prob. 21.1MCQCh. 6 - Prob. 21.2MCQCh. 6 - Prob. 21.3MCQCh. 6 - Prob. 22.1MCQCh. 6 - Prob. 22.2MCQCh. 6 - Prob. 22.3MCQCh. 6 - Prob. 23.1MCQCh. 6 - Prob. 23.2MCQCh. 6 - Prob. 23.3MCQCh. 6 - Prob. 24.1MCQCh. 6 - Prob. 24.2MCQCh. 6 - Prob. 24.3MCQCh. 6 - Prob. 25DQPCh. 6 - Prob. 26DQPCh. 6 - Prob. 27DQPCh. 6 - Prob. 28DQPCh. 6 - Prob. 29DQPCh. 6 - Prob. 30DQPCh. 6 - Prob. 31DQPCh. 6 - Prob. 32DQPCh. 6 - Prob. 33DQPCh. 6 - Prob. 34DQP
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- Audit Objectives and Procedures for Accounts Receivable. In the audit of accounts receivable, auditors develop specific audit assertions related to the receivables. They then design specific substantive procedures to obtain evidence about each of these assertions.Here is a selection of accounts receivable assertions:a. Accounts receivable represent all amounts owed to the client company at the balance sheet date.b. The client company has a legal right to all accounts receivable at the balance sheet date.c. Accounts receivable are stated at net realizable value.d. Accounts receivable are properly described and presented in the financial statements.Required:For each of these assertions, select the following audit procedure (numbered 1–7) that is best suited for the audit plan. Select only one procedure for each audit objective. A procedure may be selected once, not at all, or more than once.1. Analyze the relationship of accounts receivable and sales and compare with relationships for…arrow_forwardWhich of the following would provide an auditor with the most reliable evidence reguarding the existence of accounts receivable? A. A copy of the invoice sent to the customer. B. Acopy of the customer's sales order held by the client. C. An accounts receivable confirmation received by the auditor from the client's customer. D. An aging schedule showing the composition of the year-end-accounts receivable balance.arrow_forwardAudit documentation often includes a client-prepared, aged trial balance of accounts receivable as of the balance sheet date. The audit team uses this aging primarily toa. Evaluate internal control over credit sales.b. Test the accuracy of recorded charge sales.c. Estimate credit losses.d. Verify the existence of the recorded receivables.arrow_forward
- The following are two specific audit objectives in the audit of accounts payable. The list referred to is the list of accounts payable taken from the accounts payable subsidiary record. The total amount in the list agrees with the accounts payable balance in the general ledger. Which of these two audit objectives validates the management assertion of existence, and which one applies to completeness? Group of answer choices 1. All accounts payable included in the list represent amounts due to valid vendors. a. existence b. occurrence 2. There are no unrecorded accounts payable. a. existence b. occurrencearrow_forwardFor each of the following audit procedures, state which type of evidence-gathering technique is being used: (1) inspection or (2) computation or (3) confirmation or (4) analytical procedures or (5) enquiries or (6) observation. Agreeing the total of the accounts receivable subsidiary ledger to the accounts receivable general ledger Discussing the adequacy of the allowance for doubtful debts with the credit manager. Comparing the current year gross margin with the gross margin for the last four years. Examining a new machine to ensure that this major acquisition was Watching the client’s warehouse personnel count the raw materials Performing test counts of the warehouse personnel’s count of the raw Obtaining a letter from the client’s solicitor indicating that there were no lawsuits in progress against the Tracing the prices used by the client’s billing program for pricing sales invoices to the client’s approved price Sending a written request to the client’s customers requesting that…arrow_forwardWhich of the following procedures is MOST likely to be performed before the balance sheet date? a. Determine the date of the Letter of Representations b. Make a legal determination whether fraud has occurred. c. Search for unrecorded liabilities. d. Confirmation of receivables. e. Updating the predecessor's audit report date.arrow_forward
- Match each example audit procedure with its correct general audit objective related to accounts receivable. Select a sample of sales invoices in the subsequent period, and examine the related shipping documents for date of shipment to ascertain whether some of those shipments at the end of the period were inadvertently not recorded Provide a list of related parties to all members of the audit team to assist in identification of the transacations Existence of assets Rights to assets Review confirmations of liabilities to determine if receivables have been sold Completeness of assets Compare the amount of credits given to customers in the subsequent period to the amount estimated by management Cutoff of transactions Confirm a sample of receivables by direct communication with the debtors Valuation of assets Vouch sales and cash receipt transactions occurring near period end Financial statement presentation and disclosure ofarrow_forwardAn auditor's techniques for examining the balance sheet's accounts receivable account are most likely to concentrate on management's claim ofarrow_forwardManagement Assertions and Audit Objectives. The following are management assertions (1 through 9) and audit objectives applied to the audit of accounts payable ((a) through (h)). Management Assertion: 1 Existence 2 Rights and obligations 3 Occurrence 4 Completeness 5 Valuation and allocation 6 Accuracy 7 Cutoff 8 Classification 9 Understandibility Specific Audit Objective: (a) Existing accounts payable are included in the accounts payable balance on the balance sheet date. (b) Accounts payable are recorded in the proper account. (c) Acquisition transactions in the acquisition and payment cycle are recorded in the proper period. (d) Accounts payable representing the accounts payable balance on the balance sheet date agree with related subsidiary ledger amounts, and the total is correctly added and agrees with the general ledger. (e) Accounts in the acquisition and payment cycle are properly disclosed according to IASs. (f) Accounts payable representing the…arrow_forward
- Which of the following is the best audit procedure for determining the existence of unrecorded liabilities?a. Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable.b. Examine a sample of cash disbursements in the period subsequent to year-end.c. Examine a sample of invoices a few days prior to and subsequent to the year-end to ascertain whether they have been properly recorded.d. Examine unusual relationships between monthly accounts payable and recorded purchases.arrow_forwardConfirmation of accounts receivable that have been categorized initially by an auditor as "exceptions" most likely could be due to: O Responses that were mailed rather than faxed to the auditor. O Customers who have credit or zero balances with the client. Payments mailed to the client that have not been recorded. O Accounts receivable that have been classified as uncollectablearrow_forwardList two examples of audit evidence the auditor can use in supportof each of the following:a. Recorded amount of entries in the acquisitions journalb. Physical existence of inventoryc. Accuracy of accounts receivabled. Ownership of fixed assetse. Liability for accounts payablef. Obsolescence of inventoryg. Existence of petty casharrow_forward
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