Question
Assertions : -Completeness -Cutoff -Valuation Allocation and Accuracy -Existence and Occurrence -Rights and Obligations -Presentation and Classification Procedures : -Confirmation, -Review of Subsequent Events, -Independent
Assertions:
-Completeness
-Cutoff
-Valuation Allocation and Accuracy
-Existence and Occurrence
-Rights and Obligations
-Presentation and Classification
Procedures:
-Confirmation,
-Review of Subsequent Events,
-Independent Recalculations/Estimates,
-Vouching,
-Tracing,
-Cutoff Procedures,
-Analytical Review,
-Observation,
-Inspection and Examination,
-Footing,
-Review
-Inquiry
Ratios: Current Ratio, Quick Ratio, Profit Margin, Accounts Receivable Turnover, Inventory Turnover, Stockholders' Equity, Debt to Equity, Return on Assets
For each of the following individual situations, select the appropriate assertion ( just 1), procedures (can be up to 3), and ratio (just 1) that would be affected from the lists above:
1)
A CPA noticed that allowance for bad debts, as a percentage of accounts receivable, declined somewhat severely, despite sales activity having increased drastically over the course of the year. | ||||
2)
While reviewing the accounts receivable subsidiary ledger, the the CPA noticed that significant customer receivables had been sold to a collection agency, but not subsequently removed from the detail. | ||||
3)
As a CPA was reviewing the interim financial statements, the CPA noticed that there was a large increase in sales volume in the month of December. There appeared to be no similar upswing in sales in the prior year. The CPA thinks that some large sales completed in the next fiscal year were erroneously included in December of the year under audit. | ||||
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