Assume a sample size of 50 for all procedures, regardless of your answers in Part I. For

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Assume a sample size of 50 for all procedures, regardless of your answers in Part I. For other procedures, assume that an adequate sample size for the circumstance was selected.

The only exceptions in your audit tests for all tests of controls and substantive tests of transactions audit procedures are as follows:

1. Procedure 2—Two large transactions were identified as being unusual. Investigation determined that they were authorized acquisitions of fixed assets. They were both correctly recorded.

2. Procedure 9b(1)—A purchase order was not attached to a vendor’s invoice. The purchase order was found in a separate file and determined to be approved and appropriate.

3. Procedure 9b(5)—Six vendors’ invoices were not initialed as being internally verified. Three actual misclassifications existed. The controller explained that he often did not review codings because of the competence of the accounting clerk doing the coding and was surprised at the mistakes.


Required

a. Complete the sampling data sheet from Part I using either nonstatistical or attributes sampling.

b. Explain the effect of the exceptions on tests of details of accounts payable. Which balance-related audit objectives are affected, and how do those objectives, in turn, affect the audit of accounts payable?

c. Given your tests of controls and substantive tests of transactions results, write an audit program for tests of details of balances for accounts payable. Assume:

(1) The client provided a list of accounts payable, prepared from the master file.

(2) Acceptable audit risk for accounts payable is high.

(3) Inherent risk for accounts payable is low.

(4) Analytical procedure results were excellent.


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Auditing and Assurance services an integrated approach

ISBN: 978-0132575959

14th Edition

Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley

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