Question
13-32 (Objectives 13-3, 13-4) Following are several decisions that the auditor must make in an audit of a nonpublic company. Letters indicate alternative conclusions that
13-32 (Objectives 13-3, 13-4) Following are several decisions that the auditor must make in an audit of a nonpublic company. Letters indicate alternative conclusions that could be made.
Decisions | Alternative Conclusions |
---|---|
1. Determine whether it is cost effective to perform tests of controls. | A. It is cost effective B. It is not cost effective |
2. Perform substantive tests of details of balances. | C. Perform reduced tests D. Perform expanded tests |
3. Complete initial assessment of control risk. | E. Controls are effective F. Controls are ineffective |
4. Perform tests of controls. | G. Controls are effective H. Controls are ineffective |
Required
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Identify the sequence in which the auditor should make decisions 1 to 4.
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For the audit of the sales and collection cycle and accounts receivable, an auditor reached the following conclusions: A, D, E, H. Put the letters in the appropriate sequence and evaluate whether the auditors logic was reasonable. Explain your answer.
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For the audit of property, plant, and equipment and related acquisition records, an auditor reached the following conclusions: A, C, F, G. Put the letters in the appropriate sequence and evaluate whether the auditor used good professional judgment. Explain your answer.
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For the audit of payroll expenses and related liabilities, an auditor recorded the following conclusions: D, F. Put the letters in the appropriate sequence and evaluate whether the auditor used good professional judgment. Explain your answer.
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For the audit of inventory and related inventory cost records, an auditor reached the following conclusions: B, C, E, G. Put the letters in the appropriate sequence and evaluate whether the auditor used good professional judgment. Explain your answer.
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