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 8, Problem 59RSCQ
A
To determine
Introduction:
Requirement 1
To calculate : The sample size and sampling interval.
B
To determine
Introduction: Misstatement is an error part in the transaction area.
Requirement 2
Analyze each difference detection, if there is misstatement or not.
C
To determine
Introduction: Misstatement is defined as the difference between presentation, final amount and classification. The total estimated misstatement is the balance of the account.
Requirement 3
To calculate : Total estimated misstatement of the audit.
D
To determine
Introduction:Misstatement is defined as the difference between presentation, final amount and classification. The total estimated misstatement is the balance of the account.
Requirement 4
Discuss the nature of the
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The financial records of the Movitz Company show that R. Dennis owes $4,100 on an account receivable. An independent audit is being carried out, and the auditors send a positive confirmation to R. Dennis. What is the most likely reason as to why a positive confirmation rather than a negative confirmation was used here?a. Control risk was particularly low for accounts receivable.b. Inherent risk was particularly high for accounts receivable.c. Dennis’s account was not yet due.d. Dennis’s account was not with a related party.
You are conducting an audit and have obtained the following figures with respect to sales and accounts receivable:
2021 2020
Accounts receivable $ 3,760,000 $ 2,950,000
Allowance for doubtful accounts $ 217,000 $ 211,000
Sales $ 25,850,000 $ 23,700,000
Required:
What are the audit implications of these figures?
Identify key audit steps that you would perform for any of the above accounts.
You are auditing the accounts receivable for Conor Company as of December 31, 2021. One of your procedures was to send positive confirmations to a sample of 50 accounts. Of those 50 confirmations, 40 have been positively confirmed without comments, 7 had minor differences that have been cleared satisfactorily. Two of the responses had the following comments:
a. “We never received these goods.”
b. “The balance of $1,000 was paid on December 15, 2021.”
For each of these comments, identify the steps that you would take to clear (resolve) them.
Chapter 8 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 8 - Prob. 1TFQCh. 8 - Prob. 2TFQCh. 8 - Prob. 3TFQCh. 8 - Prob. 4TFQCh. 8 - Prob. 5TFQCh. 8 - Prob. 6TFQCh. 8 - Prob. 7TFQCh. 8 - Prob. 8TFQCh. 8 - Prob. 9TFQCh. 8 - Prob. 10TFQ
Ch. 8 - Prob. 11TFQCh. 8 - Prob. 12TFQCh. 8 - Prob. 13TFQCh. 8 - Prob. 14TFQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Prob. 18MCQCh. 8 - Prob. 19MCQCh. 8 - Prob. 20MCQCh. 8 - Prob. 21MCQCh. 8 - Refer to Exhibit 8.6. Assume a 5% risk of...Ch. 8 - Prob. 23MCQCh. 8 - Prob. 24MCQCh. 8 - Prob. 25MCQCh. 8 - Prob. 26MCQCh. 8 - Prob. 27MCQCh. 8 - Prob. 28MCQCh. 8 - Prob. 29RSCQCh. 8 - Prob. 30RSCQCh. 8 - Prob. 31RSCQCh. 8 - Prob. 32RSCQCh. 8 - Prob. 33RSCQCh. 8 - Prob. 34RSCQCh. 8 - Prob. 35RSCQCh. 8 - Prob. 36RSCQCh. 8 - Prob. 37RSCQCh. 8 - Prob. 38RSCQCh. 8 - Prob. 39RSCQCh. 8 - Prob. 40RSCQCh. 8 - Prob. 41RSCQCh. 8 - Prob. 42RSCQCh. 8 - Prob. 43RSCQCh. 8 - Prob. 44RSCQCh. 8 - Prob. 45RSCQCh. 8 - Prob. 46RSCQCh. 8 - Prob. 47RSCQCh. 8 - What is stratification? Distinguish between...Ch. 8 - Prob. 49RSCQCh. 8 - Prob. 50RSCQCh. 8 - Prob. 51RSCQCh. 8 - Prob. 52RSCQCh. 8 - Prob. 53RSCQCh. 8 - Prob. 54RSCQCh. 8 - Prob. 55RSCQCh. 8 - Prob. 56RSCQCh. 8 - Prob. 57RSCQCh. 8 - Prob. 58RSCQCh. 8 - Prob. 59RSCQCh. 8 - Prob. 60RSCQCh. 8 - Prob. 61RSCQCh. 8 - Prob. 62RSCQCh. 8 - Prob. 63RSCQ
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- Assume that you have audited accounts receivable as of 12/31/2020 and are confident that the ending balance should be $7,188,000. Further, you know that the audited balance as of 12/31/2019 was $8,462,000. You also verified cash deposits from customers through a review of the bank account. Based on that review you believe that cash receipts from customers ranges from an amount of $40,000,000 to $41,000,000. Which amount below would represent an overstatement of revenue for the year ending 12/31/2020, based on the facts above? 1. $38,500,000 2. $41,000,000 3. $39,762,000 4. $39,100,000arrow_forwardWhich of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? O Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. O Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions. O Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.arrow_forwardThe following are common tests of details of balances or analyticalprocedures for the audit of accounts receivable:1. Request 30 positive and 50 negative confirmations of accounts receivable.2. Select 10 customer accounts from the accounts receivable master file and trace tothe aged accounts receivable listing to verify name and amount.3. Select 10 customer accounts from the aged accounts receivable listing and trace tothe accounts receivable master file for name, amount, and aging categories.4. Obtain a list of aged accounts receivable, foot and cross-foot the list, and trace thetotal to the general ledger.5. Compute accounts receivable turnover for the current year and compare to theprior year.6. Perform alternate procedures on accounts not responding to second requests byexamining subsequent cash receipts documentation and shipping reports or salesinvoices.a. For each audit procedure, identify the balance-related audit objective or objectives itpartially or fully satisfies.b. In…arrow_forward
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