in Application of the Audit Process to the Other Cycles Explain why it is common for auditors to send confirmation requests to vendors with "zero balances" on the client's accounts payable listing but uncommon to follow the same approach in verifying accounts receivable.

1. If an audit client does not have pre-numbered checks, what type of misstatement has a greater chance of occurring? Under the circumstances, what audit procedure can the auditor use to compensate for the deficiency?
2. Explain the relationship between substantive tests of transactions for the acquisition and payment cycle and tests of details of balances for the verification of property, plant, and equipment. Which aspects of property, plant, and equipment are directly affected by the tests of controls and substantive tests of transactions, and which are not?
3. Explain the relationship between the payroll and personnel cycle and inventory valuation.
4. During the taking of physical inventory, the controller intentionally withheld several inventory tags from the employees responsible for the physical count. After the auditor left the client's premises at the completion of the inventory observation, the controller recorded nonexistent inventory on the tags and thereby significantly overstated earnings. How could the auditor have uncovered the misstatement, assuming that there are no perpetual records?
5. Which analytical procedures are most important in verifying notes payable? Which types of misstatements can the auditor uncover using these tests?
6. Explain why, in verifying bank reconciliations, most auditors emphasize the possibility of a nonexistent deposit in transit being included in the reconciliation and an outstanding check being omitted rather than the omission of a deposit in transit and the inclusion of a nonexistent outstanding check.