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Ch. 5, 6, & 7 Textbook Exercises
5-30 (Assertions) Throughout the planning process of an audit, the auditor must acknowledge the clients financial statements in order to identify the following issues which need an audit attention.
1. The availability for doubtful accounts which are justly presented in the amount.
2. All accounts payable owed on the balance sheet must also be included in the financial statements.
3. All purchase returns included in the financial statement are further recorded in the general ledger and are valid.
4. There is a potential risk that the purchases made within the previous week of the month might potentially be included in the following period.
5. The client could have potentially factored in accounts receivable.
6. The client has applied special purpose entities in order to finance the building. Neither the building nor the debt is included in the financial statements.
7. A retail client takes priority in inventory throu
ACC 491 Week 3 Individual Assignment Ch 2015 version
1. ACC 491 Week 3 Individual Assignment Ch
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Sample content
Ch. 5, 6, & 7 Textbook Exercises
5-30 (Assertions) Throughout the planning process of an audit, the auditor must
acknowledge the clients financial statements in order to identify the following
issues which need an audit attention.
2. 1. The availability for doubtful accounts which are justly presented in the amount.
2. All accounts payable owed on the balance sheet must also be included in the
financial statements.
3. All purchase returns included in the financial statement are further recorded in
the general ledger and are valid.
4. There is a potential risk that the purchases made within the previous week of
the month might potentially be included in the following period.
5. The client could have potentially factored in accounts receivable.
6. The client has applied special purpose entities in order to finance the building.
Neither the building nor the debt is included in the financial statements.
7. A retail client takes priority in inventory through the retail method of accounting.
8. A construction client applies a percentage from the completion method as they
attempt to recognize revenues.
9. A client has a defined benefit pension plan and does not have competent
employees to write footnote disclosures.
10. A client acquired a subsidiary company and paid an valued amount of goodwill
into the stock market which was then resulted in values at all time highs.
11. A client financed the acquisition of assets using preferred stock that pays a 3
percent dividend and must be redeemed from the shareholders next year.
Required Identify the assertion for items 1 through 11 above.
5-30. (Estimated time – 15 minutes)
Audit Objective Assertion
1.
Valuation or allocation
4. Presentation and disclosure
6-22 (Audit Evidence) Throughout the process of an audit, the audit will consist of
a wide range of documentation. Below are some forms of documentary evidence
and the source from which they gathered.
1. Bank statement sent directly to the auditor by the bank.
2. Creditor monthly statement obtained from client’s files.
3. Vouchers in client’s unpaid voucher file.
4. Duplicate sales invoices in filled order file.
5. Time tickets filed in payroll department.
6. Credit memo in customer’s file.
7. Material requisitions filed in storeroom.
8. Bank statement in client’s files.
9. Management working papers in making accounting estimates.
10. Paid checks returned with bank statement in (1) above.
11. Letter in customer file from collection agency on collectability of balance.
12. Memo in customer file from treasurer authorizing the write-off of the account
Required
a. Categorize the evidence by its source into one of four categories: (1) directly
from outsiders, (2) indirectly from outsiders, (3) internal but validated externally,
and (4) entirely internal.
b. Comment on the reliability of the four sources of documentary evidence.
a.
5. 1. Directly from outsiders
7.
Entirely internal
2. Indirectly from outsiders
8.
Indirectly from outsiders
3. Entirely internal
9.
Entirely internal
4. Entirely internal
10.
Internally but validated externally
5. Entirely internal
11.
Indirectly from outsiders
6. Entirely internal
12.
Entirely internal
b. AU326.19 states the following general presumption among others about the
reliability of
6. various types of evidence: “When evidential matter can be obtained from
independent sources outside an enterprise, it provides greater assurance of
reliability for the purposes of an independent audit than that secured solely within
the enterprise.”
Using this presumption as a guide, the four sources of evidence listed in
requirement (a)
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