Question
Part II Evidence of Errors and Financial Statement Assertions (2*7=14 points) The audit assistant collected the following evidence of errors during an audit. Identify the
Part II Evidence of Errors and Financial Statement Assertions (2*7=14 points)
The audit assistant collected the following evidence of errors during an audit. Identify the financial statement assertion affected by each error by selecting the appropriate option from the list provided below the table (A-E). An Assertion may be selected once, more than once, or not at all.
Evidence of Errors | Assertions |
1. The assistant noted on a cash confirmation from a bank that there was an outstanding short-term loan at December 31, which was not recorded by the client. |
|
2. The current portion of long-term debt was excluded from the current liabilities section of the balance sheet, and was included with long term liabilities instead. |
|
3. The assistant found a number of shipping documents for which there were no related sales invoices. |
|
4. During the year the client purchased a truck from a private individual, but legal title was not obtained. |
|
5. During her observation of the client's inventory, the assistant noted a few items in the back of the storeroom that appeared to be rather old. Upon further investigation, the items were deemed to be obsolete and worthless. |
|
6. The assistant selected several older assets from the client's asset ledger, but was unable to locate those assets for physical inspection. The accounting manager indicated that the assets had been disposed of during the year. |
|
7. The client bought a piece of property five years ago for investment purposes. The property has quadrupled in value since that time, so the client has written up the investment to more closely reflect its current market value. The client uses U.S. GAAP. |
|
Five Financial Statement Assertions: (CoVER U)
Completeness
Valuation and allocation
Existence
Rights and obligations
Understandability and classification
NEXT QUESTION :
Part IV Audit Research (3+3=6 points)
An Auditor may decide to make use of a specialist in obtaining sufficient appropriate audit evidence in certain circumstances that are material to the fair presentation of the financial statements. What guidance is provided by current auditing standards (check PCAOB website) regarding the types of matters that the auditor may decide require him or her to consider using the work of a specialist? Please identify the source and copy the appropriate paragraph(s) at below.
Your client has suggested to you that his previous auditor did not confirm accounts receivable. Search the professional standards standards (check PCAOB website) to determine whether there are any circumstances in which an auditor need not request the confirmation of accounts receivable. Please identify the source and copy the appropriate paragraph(s) at below.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started