A)

following are examples of audit procedures:

1. Review the accounts receivable with the credit manager to evaluate their collectability.

2. Stand by the payroll time clock to determine whether any employee punches in more than once.

3. Count inventory items and record the amount in the audit working papers

4. Obtain a letter form the clients solicitor addressed to the public accounting firm stating that the solicitor agrees with managements list of pending legal matters.

5. Obtain a letter from an insurance company to the public accounting firm stating the amount of the fire insurance coverage in buildings and equipment.

6. Examine an insurance policy stating the amount of the fire insurance coverage on buildings and equipment.

7. Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year.

8. Obtain information about internal control by requesting the client to fill out a questionnaire.

9. Examine a piece of equipment to make sure that a major acquisition was actually received and is in operation. 10. Calculate the ratio of sales commission expense to sales as a test of sales commissions.

11. Obtain a letter from management stating that there are no unrecorded liabilities.

12. Review the total of repairs and maintenance for each month to determine whether any months total was unusually large.

13. Compare a duplicate sales invoice with the sales journal for customer name and amount.

14. Add the sales journal entries to determine whether they were correctly totaled.

15. Make a petty cash count to make sure that the amount of the petty cash fund is intact.

16. Obtain a written statement from a bank stating that the client has $15 671 on deposit and liabilities of $50 000 on a demand note.

Required: Classify each of the preceding items according to the seven types of evidence:

(1) Physical examination,

(2) Confirmation,

(3) Documentation,

(4) Observation,

(5) Inquiries of the client,

(6) Reperformance

(7) Analytical procedures

B) Explain what the expectation gap is in relation to external auditing.