5.8Identifying types of audit evidenceLO2

Required

Identify the type of audit evidence being used in each situation described below:

a. The auditor tests cash remittance advices to ensure that allowances and discounts are appropriate and that receipts are posted to the correct customer accounts in the right amounts. In addition, the auditor reviews the documents supporting unusual discounts and allowances.

b. The auditor examines vehicle insurance policies and checks insurance expense for the year. In addition, the auditor reviews the expense with respect to changes and ending balances in capital asset accounts.

c. The auditor observes the auditee taking a physical inventory count. In addition, a letter is received from a public storage facility stating the amounts of the auditee's inventory stored in it. The company uses a weighted average cost flow assumption, which is tested by the auditor's computer software program.

d. Using audit software, an auditor selects vendors' accounts payable with debit balances from the client's computer and compares these amounts and their calculation with cash disbursements and vendor credit memos.

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