P-1 Your audit client, Banner, is a retail sporting goods store. You are currently working on the inventory portion of the audit. In obtaining audit evidence in support of financial statement assertions, the auditor develops specific audit objectives in response to those assertions. Audit procedures are then selected to accomplish audit objectives. For each specific inventory audit objective listed, select the most closely related account balance financial statement assertion and the most appropriate audit procedure. Financial statement assertions and audit procedures may be selected once, more than once, or not at all. Specific audit objectives: 1. The entity has legal title to inventories. 2. Recorded inventory quantities include all products on hand. 3. Inventories are reduced, when appropriate, to replacement costs or net realizable value. 4. Cost of inventories is properly calculated. 5. The major categories of inventories and their basis of valuation are adequately reported in the financial statements. P-2. The auditor determines that both of the following objectives will be part of the audit of Anthony Company. For each of the following audit objectives, select the substantive test that would most likely provide support for the objective. A substantive test may be used once, more than once, or not at all. Substantive Tests: - Perform tests of subsequent cash receipts after the balance sheet date. - Review and assess an aging schedule of accounts receivable. - Read the financial statements (including notes) for completeness. Objective Substantive Tests 1. Verify existence of accounts receivable. 2. Determine that accounts receivable are valued at their net realizable value. 3. Determine that proper receivable disclosures are presented. P-3 You are working on the Coleman audit. Assume that each of the four sections of this question are unrelated. Ashley Wilson, another staff member, has given you the following list of what she refers to as "internal control deficiencies" and has asked you to review each point and make sure that you agree that each is an internal control deficiency. (Explain your Answer) 1. Voided cheoks are torn up and destroyed. Agreo, this isDisagree, this a control deficiency not a control deficiency 2. Separate sequences of prenumbered checks are used for each bank account. 3. The purchasing department manager and assistant manager are the authorized check aignors. 4. No checks are made payable to cash. 5. The authorized check signors reconcile bank accounts. 6. All cash receipts (checks) received through the mail are prelisted by the two individuals who open the mail. A11 cash receipts received through the mail are restrictively ondorsed when received. When a disbursement is made based on paper supporting documents, those supporting documents are canceled by the individual who signs the check
