1/During your audit of NewClient Inc., you noted a significant increase in accounts receivable without a corresponding increase in the allowance for doubtful accounts. This could suggest that management has deliberately understated the allowance for doubtful accounts (or overstated sales/receivables), or made a mistake in the calculation. You believe that there may be another possible explanation, which does not suggest that was a misstatement in accounts receivable or the allowance for doubtful accounts. Indicate one possible explanation and indicate what of evidence you would obtain to establish whether your explanation is the cause of the difference.

2/You are testing PPE. You determined that PPE exists, it is correctly valued, the mathematical calculations are accurate, all allocation adjustments are properly recorded, the PPE is also properly classified and presented in the financials, all necessary note disclosure are made. Can you be reasonably certain that the inventory is not materially misstated? Explain?

3/John is an auditor of XYZ company. He is testing the existence assertion of inventory. He went to the purchasing manager and requested the list of all invoices that XYZ received for purchases of inventory. Based on these invoices, John identified the inventory items and physically inspected them to make sure they existed. John concluded that he can be reasonably sure that the are no material misstatements related to the existence assertion of inventory. Do you agree with John's conclusion? Why or why not?

4/Your client is a hotel. You are in charge of testing their revenues for fiscal year ended December 31, 2021.Your senior instructed you to test the revenues using an analytical procedure (other than using last year's revenue as the expectation for this year's revenue). Explain how you would do it.

5/The debt to assets ratio is calculated as total debt/total assets. Your client has the debt to assets ratio of 0.8. Is that good? Why?

6/What do you gain from analyzing the days to collect accounts receivable ratio as an auditor?

7/ The overall materiality set for the engagement is $10 thousand. The performance materiality is $7 thousand. Specific materiality is not used. Could an error (not fraud) of $4 thousand be deemed material? If not - explain why, if yes - give an example.