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The following are examples of audit procedures. For each procedure: Name the management assertion(s) being tested. Identify the type of evidence Review the accounts receivable
The following are examples of audit procedures. For each procedure:
- Name the management assertion(s) being tested.
- Identify the type of evidence
- Review the accounts receivable with the credit manager to evaluate their collectability .
- Count inventory items to verify the amount posted and recorded in the inventory account.
- Trace inventory items to the inventory account to see that it was included.
- Obtain a letter from the clients attorney addressed to the CPA firm stating that the attorney is not aware of any existing lawsuits.
- Extend the cost of inventory times the quantity on an inventory listing to test whether it is accurate.
- Obtain a letter from an insurance company to the CPA firm stating the amount of the fire insurance coverage on building and equipment.
- Examine an insurance policy stating the amount of the fire insurance coverage on buildings and equipment.
- Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year.
- Examine receiving reports and shipping documents to determine if inventory purchased and sold at year end is recorded in the proper period.
- Trace the total on the cash disbursements journal to the general ledger.
- Examine a piece of equipment to make sure that a major acquisition was actually received and is in operation.
- Calculate the ratio of sales commissions expense to sales as a test of sales commissions.
- Examine corporate minutes to determine the authorization of the issue of bonds.
- Obtain a letter from management stating that there are no unrecorded liabilities.
- Review the total of repairs and maintenance for each month to determine whether any months total was unusually large.
- Compare a duplicate sales invoice with the sales journal for customer name and amount.
- Add the sales journal entries to determine whether they were correctly totaled.
- Make a petty cash count to make sure that the amount of the petty cash fund is intact.
- 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.
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