Auditing: A Risk Based-Approach to Conducting a Quality Audit
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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Chapter 6, Problem 54RSCQ

Indicate how the auditor could use substantive analytical procedures in resting the following accounts:

a. Interest expense related to bonds outstanding.
b. Natural gas expense for a public utility company.
c. Supplies expense for a factory.
d. Cost of goods sold for a fast-food franchisor (e.g., Wendy’s or McDonald’s). Note that cost of goods sold tends to average about 35% of sales in fast-food franchises.
e. Salary expense for an office (region) of a professional services firm.

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The descriptive sections of the annual report that provides insight into what the company does and the types of risks it lates is felt Select one: OA management discussion and analysis. B. the industry overview. OC. the audit opinion. D. notes to the financial statements. To best interpret the accounts receivable turnover ratio, the days in accounts receivable should be compared to the company's Select one: A sales revenue. B. credit terms. OC. inventory turnover. D. accounts receivable balance. Two companies have an identical amount of current assets and current liabilities Donald Inc. has 40% of its current assets invested in whereas Mickey Corp. has 30% of its current assets invested in inventory Which of the following statements is true? Select one: OA. Donald will have the higher quick ratio. OB. Donald will have the higher current ratio. OC. The companies are equally liquid because their current ratios are the same OD. Donald is less liquid than Mick
An auditor is required to confirm accounts receivable if the accounts receivable balances area. Older than the prior year.b. Material to the financial statements.c. Smaller than expected.d. Subject to valuation estimates.
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Auditing: A Risk Based-Approach to Conducting a Quality Audit

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