Auditing and Assurance Services 16th Edition

ISBN 13

978-0134065823

ISBN 10

0134065824

Authors

Alvin A. Arens, Chris E. Hogan, Mark S. Beasley, Randal J. Elder

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205 documents found.

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978-0134065823 Chapter 1 Solution Manual Part 1

1-1 1-1 1-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 1 The Demand for Audit and Other Assurance Services The Demand for Audit and Other Assurance Services The Demand for Audit and Other Assurance Services Concept Checks

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978-0134065823 Chapter 1 Solution Manual Part 2

1-8 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 1-17 a. The services provided by Consumers Union are very similar to assurance services provided by CPA firms. The services provided by Consumers Union and assurance services provided by CPA firms are designed to

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978-0134065823 Chapter 10 Solution Manual Part 1

10-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 10 Assessing and Responding to Fraud Risks Concept Checks P. 311 1. The three conditions of fraud referred to as the fraud triangle are (1) Incentives/Pressures; (2) Opportunities;

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978-0134065823 Chapter 10 Solution Manual Part 2

10-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 10-26 (continued) whether an audit performed in accordance with auditing standards should have uncovered the fraud. The auditor is not required to search for immaterial fraudulent transactions; however, the auditor is required

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978-0134065823 Chapter 10 Solution Manual Part 3

10-21 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 10-34 (continued) 7. a. Sales may be fictitiously recorded before any goods were shipped. b. Sales and accounts receivable. c. Recorded amounts meet the criteria for revenue recognition c.

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978-0134065823 Chapter 11 Solution Manual Part 1

11-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 11 Internal Control and COSO Framework Concept Checks P. 339 1. Management typically has three broad objectives in designing effective internal controls. 1. Reliability of Reporting

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978-0134065823 Chapter 11 Solution Manual Part 2

11-11 Copyright 2017 Pearson Education, Inc. 11-25 1. a. Adequate documents and records, and independent checks on performance. b. Transactions are recorded on the correct dates (cutoff). c. Carefully coordinate the physical count of inventory on the last day of the year with the recording of sales to make certain

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978-0134065823 Chapter 12 Solution Manual Part 1

12-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 12 Assessing Control Risk and Reporting on Internal Controls Concept Checks P. 381 1. As illustrated by Figure 12-1, there are four phases in the process of understanding internal

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978-0134065823 Chapter 12 Solution Manual Part 2

12-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 12-21 (continued) system. She must obtain an understanding of internal control to determine whether it is possible to conduct an audit at all. Auditing standards require, at a minimum, an understanding of internal

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978-0134065823 Chapter 12 Solution Manual Part 3

12-21 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 12-28 (continued) 4. Access the clients electronic inventory master file and list all items or parts of which the quantity on hand seems excessive in relation to quantity used or sold during the

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978-0134065823 Chapter 12 Solution Manual Part 4

12-31 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 12-35 (continued) Establish standardized programming procedures and have Melinda review changed programs for compliance with those Melinda review changed programs for compliance with those Melinda review changed programs for compliance with those

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978-0134065823 Chapter 13 Solution Manual Part 1

13-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 13 Overall Audit Strategy and Audit Program Concept Checks P. 419 1. The five types of tests auditors use to determine whether financial statements are fairly stated

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978-0134065823 Chapter 13 Solution Manual Part 2

13-11 13-11 13-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 13-26 a. TRANSACTION-RELATED AUDIT OBJECTIVE b. TEST OF CONTROL PROCEDURE c. SUBSTANTIVE TEST 1. Recorded transactions exist, recorded transactions are stated at the correct amounts, and transactions are properly classified.

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978-0134065823 Chapter 13 Solution Manual Part 3

13-17 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 13-32 (continued) Parts 7, 9, and 1 are all a part of planning and are therefore done early. These are in the sequence shown in Chapter 8. As part of planning

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978-0134065823 Chapter 14 Solution Manual Part 1

14-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 14 Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions Tests of Controls and Substantive Tests of Transactions Tests of Controls and Substantive Tests of Transactions

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978-0134065823 Chapter 14 Solution Manual Part 2

14-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 14-23 (continued) 4. a. Online sales are recorded in the sales system (Completeness). b. Review online sales system documentation and make inquiries of client personnel to determine that the automatic interface is

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978-0134065823 Chapter 14 Solution Manual Part 3

14-21 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 14-30 POSSIBLE ERROR OR FRAUD CONTROL 1. Customer checks are properly credited to customer accounts and are properly deposited, but errors are made in recording receipts in the cash receipts journal. g. An

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978-0134065823 Chapter 14 Solution Manual Part 4

14-30 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 14-34 (continued) d. TRANSACTION- RELATED AUDIT OBJECTIVE SUBSTANTIVE TEST OF TRANSACTIONS AUDIT PROCEDURES 1. Recorded sales occurred. Select a sample of sales from sales journal and examine customers purchase order, sales order

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978-0134065823 Chapter 15 Solution Manual Part 1

15-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 15 Audit Sampling for Tests of Controls and Substantive Tests of Transactions Concept Checks P. 489 1. A representative sample is one in which the characteristics of interest

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978-0134065823 Chapter 15 Solution Manual Part 2

15-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 15-28 (continued) 2. Test time delay between warehouse removal slip date and 2. Test time delay between warehouse removal slip date and 2. Test time delay between warehouse removal slip

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978-0134065823 Chapter 15 Solution Manual Part 3

15-20 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 15-34 (continued) INVOICE NUMBER EXCEPTION ANALYSIS 6810 Confirm the account balances to the customers; examine the reduction in the perpetual inventory records. 7625 Trace the amount to the sales journal and accounts receivable

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978-0134065823 Chapter 16 Solution Manual Part 1

16-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 16 Completing the Tests in the Sales and Collection Cycle: Completing the Tests in the Sales and Collection Cycle: Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

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978-0134065823 Chapter 16 Solution Manual Part 2

16-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 16-17 (continued) of controls based upon the selection of the significant controls. The auditor would then perform the tests of the significant controls to determine the effectiveness ofthe controls and to plan the

Auditing and Assurance Services 16th Edition

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978-0134065823 Chapter 16 Solution Manual Part 3

16-21 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 16-30 (continued) d. When no response is received to the second request for positive confirmation, the auditor should use alternative procedures. These normally include examination of the customers remittance advice and related

Auditing and Assurance Services 16th Edition

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978-0134065823 Chapter 16 Solution Manual Part 4

16-28 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 16-36 (continued) c. The auditor would likely deem that the risks of material misstatement related to all of the transaction-related audit objective for sales and cash receipts transactions as significant risks due

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978-0134065823 Chapter 17 Solution Manual Part 1

17-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 17 Audit Sampling for Tests of Details of Balances Concept Checks P. 575 1. The steps in nonstatistical sampling for tests of details of balances and for

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978-0134065823 Chapter 17 Solution Manual Part 2

17-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 17-25 (continued) Sample Response Comment 4 e. Treat the error as an anomaly that is not projected. The single error related to a currency adjustment. If the auditor performs tests to verify

Auditing and Assurance Services 16th Edition

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978-0134065823 Chapter 17 Solution Manual Part 3

17-19 Copyright 2017 Pearson Education, Inc. 17-19 Copyright 2017 Pearson Education, Inc. 17-19 Copyright 2017 Pearson Education, Inc. 17-31 (continued) b. Determination of ARIA - Note that there are many ways to estimate ARIA. One method is as follows: ARIA = AAR / (IR x CR

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978-0134065823 Chapter 18 Solution Manual Part 1

18-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 18 Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable Concept Checks P. 616 1. There are several balance

Auditing and Assurance Services 16th Edition

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978-0134065823 Chapter 18 Solution Manual Part 2

18-11 18-11 18-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 18-20 AUDIT PROCEDURE a. TYPE OF EVIDENCE b. TRANSACTION AUDIT OBJECTIVE c. TEST OF CONTROL OR SUBSTANTIVE TEST OF TRANSACTION 1.a. Inspection Recorded acquisitions

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978-0134065823 Chapter 18 Solution Manual Part 3

18-21 18-21 18-21 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 18-24 (continued) MISSTATEMENT a. TRANSACTION- RELATED AUDIT OBJECTIVE NOT MET b. PREVENTIVE CONTROL c. SUBSTANTIVE PROCEDURE 4 Acquisition transactions are properly classified (classification). Account distributions are reviewed by

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978-0134065823 Chapter 18 Solution Manual Part 4

18-28 18-28 18-28 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 18-28 (continued) a. BERGERON INTERNAL CONTROLS b. TRANSACTION- RELATED AUDIT OBJECTIVE(S) c. TEST OF CONTROLS 11. Controller reconciles on a monthly basis the accounts payable listing to the

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978-0134065823 Chapter 19 Solution Manual Part 1

19-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 19 Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts Concept Checks P. 645 1. The reason for the emphasis on current period

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978-0134065823 Chapter 19 Solution Manual Part 2

19-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 19-25 a. Both U.S. GAAP and IFRS standards generally contain similar requirements for assessing the impairment of assets, including goodwill. Both standards require the testing of goodwill for impairment at least annually, or more

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978-0134065823 Chapter 19 Solution Manual Part 3

19-17 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 19-27 (continued) 4. The paving and fencing are land improvements and should be depreciated over their useful lives. Land improvements (may be $50,000 combined with buildings account buildings and improvements)

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978-0134065823 Chapter 2 Solution Manual

2-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 2 The CPA Profession Concept Checks P. 28 1. The four major services that CPAs provide are: a. Audit and assurance services Assurance services are independent

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978-0134065823 Chapter 20 Solution Manual Part 1

20-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 20 Audit of the Payroll and Personnel Cycle Concept Checks P. 666 1. Transactions for the payroll and personnel cycle are generally far more significant than for

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978-0134065823 Chapter 20 Solution Manual Part 2

20-11 Copyright 2017 Pearson Education, Inc. 20-11 Copyright 2017 Pearson Education, Inc. 20-11 Copyright 2017 Pearson Education, Inc. 20-24 A flowchart of steps for each type of test is given below (requirements a., b., and c.): TESTS OF CONTROLS OR SUBSTANTIVE TESTS OF TRANSACTIONS TESTS OF DETAILS OF BALANCES

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978-0134065823 Chapter 21 Solution Manual Part 1

21-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 21 Audit of the Inventory and Warehousing Cycle Concept Checks P. 694 1. Inventory is often the most difficult and time consuming part of many audit engagements because:

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978-0134065823 Chapter 21 Solution Manual Part 2

21-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 21-18 (continued) to rely on the cost accounting records which provide the costs (i.e., it is far more efficient to test the cost accounting to rely on the cost accounting records

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978-0134065823 Chapter 21 Solution Manual Part 3

access to the inventory on the shelves in the stores. is a high risk, given the perishable nature of food items. amounts appear reasonable and whether there is a risk of inventory obsolescence. access to the inventory on the shelves in the stores. is a high risk, given

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978-0134065823 Chapter 22 Solution Manual Part 1

22-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 22 Audit of the Capital Acquisition and Repayment Cycle Audit of the Capital Acquisition and Repayment Cycle Audit of the Capital Acquisition and Repayment Cycle Concept Checks P. 720

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978-0134065823 Chapter 22 Solution Manual Part 2

22-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 22-23 (continued) c. Procedure 2 is not necessary in light of procedure 3. They both perform the same function and the confirmation is from an independent source. The sample sizes for the

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978-0134065823 Chapter 23 Solution Manual Part 1

23-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 23 Audit of Cash and Financial Instruments Concept Checks P. 748 1. The appropriate tests for the ending balance in the cash accounts depend heavily on the initial

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978-0134065823 Chapter 23 Solution Manual Part 2

23-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 23-19 (continued) c. RECONCILING ITEM AUDIT PROCEDURE 1. Deposits in transit Trace to duplicate deposit slip and entry on cutoff bank statement. 2. Erroneous check Examine correction notice in August charge received

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978-0134065823 Chapter 24 Solution Manual Part 1

24-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 24 Completing the Audit Concept Checks P. 776 1. The auditor is particularly concerned with whether management has disclosed all required information (completeness objective for presentation and disclosure).

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978-0134065823 Chapter 24 Solution Manual Part 2

24-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 24-22 (continued) d. The search for unknown commitments is typically performed as part of individual audit areas. Three examples of procedures Johnson is likely to perform for the purpose of uncovering commitments are:

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978-0134065823 Chapter 25 Solution Manual Part 1

25-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 25 Other Assurance Services Concept Checks P. 807 1. Preparation is defined in SSARS as a service where the CPA is engaged by the client to prepare

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978-0134065823 Chapter 25 Solution Manual Part 2

25-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 25-24 (continued) d. Additional procedures should be performed when the accountant believes, based on the information obtained through inquiry and analytical procedures, that the financial statements may be materially misstated. Examples where

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978-0134065823 Chapter 26 Solution Manual Part 1

26-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 26 Internal and Governmental Financial Auditing and Operational Auditing Concept Checks P. 832 1. Internal auditors who perform financial auditing are responsible for evaluating whether their companys internal

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978-0134065823 Chapter 26 Solution Manual Part 2

26-9 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 26-21 (continued) c. The following certifications are available: 1. CIA (Certified Internal Auditor) 2. CCSA (Certification in Control Self-Assessment) 3. CFSA (Certified Financial Services Auditor) 4. CGAP (Certified Government Auditing Professional) 5.

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978-0134065823 Chapter 3 Solution Manual Part 1

3-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 3 Audit Reports Concept Checks P. 57 1. The standard unmodified opinion audit report for a nonpublic entity contains the following eight parts: 1. Report title: Auditing

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978-0134065823 Chapter 3 Solution Manual Part 2

3-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 3-24 (continued) 6. There is no separate scope paragraph that describes what 6. There is no separate scope paragraph that describes what 6. There is no separate scope paragraph that describes what an

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978-0134065823 Chapter 4 Solution Manual Part 1

4-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 4 Professional Ethics Concept Checks P. 85 1. The following is the six-step approach to resolving an ethical dilemma: 1. Obtain the relevant facts.

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978-0134065823 Chapter 4 Solution Manual Part 2

heard of this arrangement, some might perceive that there is a lack of independence. policy or may require approvals by a more senior member of management of the audit firm. equivalent to a bonus. explanation of her reasons as soon as practical. heard of this arrangement, some

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978-0134065823 Chapter 4 Solution Manual Part 3

4-17 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 4-27 (continued) c. Section 1.320.030.03 indicates that new legislation or evolution of a new form of business transaction are examples of unusual circumstances that may justify a departure from the Accounting

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978-0134065823 Chapter 5 Solution Manual Part 1

5-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 5 Legal Liability Concept Checks P. 118 1. Several factors that have affected the increased number of lawsuits against CPAs are: The growing awareness of

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978-0134065823 Chapter 5 Solution Manual Part 2

5-8 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 5-19 (continued) 3. Given that the auditors were able to satisfy themselves through alternative procedures that the inventory existed as of the end of the year, their behavior in this instance would be

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978-0134065823 Chapter 6 Solution Manual Part 1

6-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 6 Audit Responsibilities and Objectives Concept Checks P. 152 1. It is managements responsibility to adopt sound accounting policies, maintain adequate internal control, and make fair representations in the

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978-0134065823 Chapter 6 Solution Manual Part 2

6-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 6-26 (continued) The auditor normally assesses the likelihood of material misappropriation of assets as a part of understanding the entitys internal control and assessing control risk. Audit evidence should be expanded when the

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978-0134065823 Chapter 7 Solution Manual Part 1

7-1 Chapter 7 Audit Evidence Concept Checks P. 192 1. Following are six characteristics that determine reliability of evidence and an example of each. FACTOR DETERMINING RELIABILITY EXAMPLE OF RELIABLE EVIDENCE Independence of provider Confirmation of a bank balance Effectiveness of clients internal

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978-0134065823 Chapter 7 Solution Manual Part 2

7-11 7-11 7-11 7-27 (continued) ACCOUNT NAME FROM WHOM CONFIRMED INFORMATION TO BE CONFIRMED NOTES RECEIVABLE A selected sample of notes receivable outstanding at the balance sheet date. If a note receivable was written off during the year, the balance written off should be confirmed. Name and address

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978-0134065823 Chapter 7 Solution Manual Part 3

7-35 Here are expected values for each account except sales and the calculated difference between the expected value and actual recorded balance: ACCOUNT EXPECTED VALUE DIFFERENCE IN EXPECTED AND RECORDED REASONING TO SUPPORT EXPECTED VALUE Executive salaries $563,348 ($546,940 x 103%) -9.34% ($563,348 - $615,970) / $563,348

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978-0134065823 Chapter 8 Solution Manual Part 1

8-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 8 Audit Planning and Materiality Concept Checks P. 234 1. The eight major steps in planning audits are: 1. Accept client and perform initial planning

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978-0134065823 Chapter 8 Solution Manual Part 2

8-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Discussion Questions And Problems 8-29 AUDIT ACTIVITIES RELATED PLANNING PROCEDURE 1. Review accounting principles unique to the clients industry. (2) Understand the clients business and industry 2. Determine the likely users

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978-0134065823 Chapter 8 Solution Manual Part 3

8-21 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 8-38 (continued) d. By allocating 75% of the preliminary estimate to accounts receivable, inventories, and accounts payable, there is far less materiality to be allocated to all other accounts. Given the total

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978-0134065823 Chapter 8 Solution Manual Part 4

8-28 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 8-40 (continued) (part of requirement e.) Pinnacle Manufacturing Company Income Statement - Welburn Division For the Year Ended December 31

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978-0134065823 Chapter 9 Solution Manual Part 1

9-1 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Chapter 9 Assessing the Risk of Material Misstatement Concept Checks P. 268 1. The risk of material misstatement exists at two levels: the overall financial statement level and

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978-0134065823 Chapter 9 Solution Manual Part 2

9-11 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 9-30 (continued) assessment, the auditor should revise the risk assessment and modify planned audit procedures or perform additional procedures in response to the revised risk assessments. modify planned audit procedures or perform additional

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978-0134065823 Chapter 9 Solution Manual Part 3

9-20 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 9-39 (continued) Bank Loan Payable It seems somewhat strange for the Company to have an outstanding balance on its bank loan payable at the end of 2016 given its excellent operating results.

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978-0134065823 P1237 Excel

PINNACLE MANUFACTURING AUDIT - PART IV CONTROL RISK MATRIX - ACQUISITIONS TRANSACTION- Recorded Existing Recorded Recorded Acquisition Acquisition RELATED AUDIT acquisitions acquisition acquisition acquisition transactions transactions OBJECTIVES are for goods transactions transactions transactions are properly are recorded and services are recorded are stated are properly classified on the received (complete- at the cor- included in

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978-0134065823 P1435a Excel

# a. Key Internal Control b. Transaction Related Audit Objectives c. Test of Control d. Substantive Test of Transaction 1. Segregation of the purchasing, receiving, and cash disbursements functions. Recorded acquisitions are for goods and services actually received (occurrence). Discuss segregation of duties with personnel and observe activities. Trace entries in the acquisitions journal to

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978-0134065823 P1435b Excel

Acquisitions Substantive Tests of Transactions More than one audit procedure is listed for certain objectives even though the requirement is for only one procedure. Transaction-Related Audit Objective Substantive Audit Procedures Occurrence Compare prices on vendor invoices with approved price limits established by management. Review the acquisitions journal, general ledger, and accounts payable master file

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978-0134065823 P1527 Excel

PROBLEM 15-27 GENERATION OF RANDOM SAMPLES SALES BILL OF INVOICE LADING CUSTOMER RANGE 1 - 18221 - Pg. 1-20 8274 29427 Ln. 1-50 SAMPLE ITEM 13975 24066 7 - 8 26585 18874 18 -17 31306 28176 6 - 38 4792 20018 16 - 7 54812 18610 4 - 12 Note: Numbers change whenever there is a cell entry. Copy numbers and paste as a

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978-0134065823 P1528 Excel

PROBLEM 15-28 COMPUTER GENERATION OF RANDOM NUMBERS Illustration of first 10 sample items: 33394 19128 17152 25100 14682 12481 13824 17406 22138 30950

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978-0134065823 P1537 Excel

Client: Pinnacle Manufacturing Audit Area: Tests of Controls and Substantive Test of Transactions--Acquisitions. Define the Objective(s): Examine vendors' invoices, receiving reports, purchase orders, and other related documents to determine whether the system has functioned as intended and as described in the audit program. Define the population precisely (including stratification, if any): Vouchers from 1/1/2016

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978-0134065823 P1637 Excel

requirements d, e, and f Misstatement in Related Accounts Difference: Other Books Timing Misstatement Balance Income Balance Amount Over (Under) Difference: in Accounts Sheet Statement Per Confirmed Amount No Payable Misstatement Misstatement Brief Vendor Books by Vendor Confirmed Misstatement o/s (u/s) o/s (u/s) o/s (u/s) Explanation Key Accounts (>$250,000) FiberChem 793,050 825,550 (32,500) (32,500) (32,500)

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978-0134065823 P1724 Excel

Recorded Confirmation Value Response Misstatement Acct. 147 24,692$ 22,486$ 2,206$ Pricing error Acct. 228 183,219 157,216 26,003 Cutoff error Acct. 278 7,546 5,546 - Timing difference Acct. 497 15,319 - - Timing difference Acct. 564 8,397 7,858 539 Error in quantity shipped Acct. 653 32,687 19,328 13,359 Cutoff error Acct. 830 5,286 - 5,286 Cutoff error Total misstatement

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978-0134065823 P1726 Excel

PROBLEM 17-26 COMPUTER GENERATION OF RANDOM NUMBERS Selection of 10 sample items: 204229 153774 189978 120315 140353 85371 68657 196629 105030 78612 PROBLEM 17-26 SYSTEMATIC SELECTION OF NUMBERS Population 207295 Sample size 10 Start = 1857 11857 222,586 343,315 464,044 584,773 6105,502 7126,231 8146,960 9167,689 10 188,418 = Interval = = 20,729

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978-0134065823 P1727 Excel

1 $2,728.00 $2,498.00 $230.00 0.084 3 3,890.00 1,190.00 2,700.00 0.694 4 815.00 785.00 30.00 0.037 6 3,215.00 3,190.00 25.00 0.008 Totals $10,648.00 $7,663.00 $2,985.00 (a) (b) ( c = a x b) (d) (e = c x d) TAINTING SAMPLING PROJECTED MISSTATE-INCREMENTAL CHANGE IN CONFIDENCE MISSTATEMENT PLUS INCREMENTAL ALLOWANCE FOR SAMPLING PROJECTED MISSTATE-INCREMENTAL CHANGE IN CONFIDENCE

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978-0134065823 P1730 Excel

STATISTICAL CALCULATIONS - INVENTORY SAMPLE ITEM VALUES: Misstatement Item Audit Book Misstatement Amount No. Value Value Amount Squared 1 812.50 740.50 -72.00 5184.00 2 12.50 78.20 65.70 4316.49 3 10.00 51.10 41.10 1689.21 4 25.40 61.50 36.10 1303.21 5 600.10 651.90 51.80 2683.24 6 0.12 0.00 -0.12 0.01 7 51.06 81.06 30.00 900.00 8 83.11 104.22 21.11 445.63 1594.79 1768.48 173.69 16521.80 Population size =

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978-0134065823 P1731 Excel

SOLUTION TO CASE 17-31 Note: The random numbers in column C were set using the RANDBETWEEN function. Because the numbers change, the original formulas no longer appear on this file. GENERATION ORDER ASCENDING ORDER Sample Dollar Sample Dollar Item No. No. Item No. No. 1 2,455,189 28 252,814 2 8,292,222 30 699,261 3 10,714,628 13 1,619,044 4

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978-0134065823 P1732 Excel

NONSTATISTICAL SAMPLING EVALUATION WORKSHEET CLIENT AND YEAR-END: Danforth Paper Company PREPARED BY AND DATE: REVIEWED BY AND DATE: A/R RECORDED BALANCE: $2,760,000 RECORDED BALANCE OF ACCOUNTS AUDITED 100% $465,000 RECORDED BALANCE OF ACCOUNTS TO BE SAMPLED: $2,295,000 TOLERABLE MISSTATEMENT $100,000 # OF ACCOUNTS 7,320 # OF ACCOUNTS TO BE TESTED 100% 23 # OF ACCOUNTS TO BE SAMPLED 77 EVALUATION OF

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978-0134065823 P1830 Excel

WARD PUBLISHING COMPANY SECTION V - ATTRIBUTES SAMPLING TABLES SAMPLING DATA SHEET TO DETERMINE SAMPLE SIZE USING A 5 PERCENT ARO Planned Audit Actual Results TER Initial EPER 2345678910 Sample Sample Excep- Exception -------- --- --- --- --- --- --- --- --- --- Description of Attribute EPER TER ARO Size Size tions Rate CUER 0.00 149

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978-0134065823 P2126 Excel

ALADDIN PRODUCTS SUPPLY COMPANY RATIO CALCULATIONS Part a. DATA ENTRY AREA: 2016 2015 2014 2013 Sales 92,800,000 86,800,000 78,400,000 69,600,000 Cost of sales 68,400,000 67,200,000 60,800,000 54,000,000 Beginning inventory 9,200,000 8,400,000 7,600,000 6,000,000 Ending inventory 11,600,000 9,200,000 8,400,000 7,600,000 RESULTS AREA: 2016 2015 2014 2013 Gross margin/Sales 26.3% 22.6% 22.4% 22.4% Inventory Turnover 6.6 7.6 7.6 7.9 Part c. FLUCTUATION

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978-0134065823 P2130 Excel

SEA GULL AIRFRAMES, INC. SUMMARY OF INVENTORY MISSTATEMENTS QUANTITY PRICE Amount Per Differ- Per Differ- Recorded Correct of Item No. and Description Inventory Correct ence Inventory Correct ence Amount Amount M/S A. L37 Spars 3000 3000 0 8.00 8.00 0.0000 24000.00 24000.00 0.00 B. B68 Metal Formers 10000 833 9167 1.20 1.3875 -0.1875 12000.00 1155.79 -10844.21 C.

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978-0134065823 P2429 Excel

Item Total Amount Current Assets Noncurrent Assets Current Liabilities Noncurrent Liabilities Income Before Tax 1 125000 (125,000) 125,000 2 85,000 (85,000) 60,000 (25,000) 3 44,000 (44,000) (44,000) 4 52,000 52,000 52,000 5 43,000 0 6 Not known 0 0 (129,000) 112,000 (125,000) 0 108,000 POSSIBLE MISSTATEMENT OVERSTATEMENT (UNDERSTATEMENT) The net effect of the adjustments to the balance sheet and income

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978-0134065823 P735 Excel

MOREHEAD TECHNOLOGIES ANALYTICAL PROCEDURES Audited Balance Preliminary Balance Difference in expected Account 10/31/2015 10/31/2016 Expected Value recorded amounts Reasoning for Expected Value Sales 51,316,234 57,474,182 Executive salaries 546,940 615,970 563,348 -9.34% Executives received 3% raise November 1, 2015. Factory hourly payroll 10,038,877 11,476,319 11,167,247 -2.77% Factory workers received 3% raise November 1, 2015, and volume increaed 8% Factory

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978-0134065823 P737 Excel

VANDERVOORT COMPANY Schedule N-1 Date A/C #110 - NOTES RECEIVABLE Prepared by JD 01/21/17 12/31/16 Approved by PP 02/15/17 Account #110 - Notes Receivable Interest Date Interest Made/ Rate/ Face Value of Balance Balance Receivable Receivable Maker Due Date Paid to Amount Security 12/31/15 Additions Payments 12/31/16 12/31/15 Earned Received 12/31/16 Apex Co. c * 6/15/15/

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978-0134065823 P832 Excel

2016 2015 2014 2013 Sales (000) 14,211$ 12,916$ 11,462$ 10,351$ Cost of sales (000) 9,223 8,266 7,313 6,573 Gross margin 4,988$ 4,650$ 4,149$ 3,778$ Percent 35.1% 36.0% 36.2% 36.5% Drug Nondrug Drug Nondrug Industry Sales Sales COS COS GM 2016 $5,126 $9,085 $3,045 $6,178 32.7% 2015 $5,051 $7,865 $2,919 $5,347 32.9% 2014 $4,821 $6,641 $2,791 $4,522

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978-0134065823 P939a Excel

Stanton Enterprises Worksheet 9-39A Determination of Materiality and Allocation to the Accounts 12/31/2016 DETERMINATION OF MATERIALITY: Income before taxes $8,004,277 Possible adustments - estimated. See Worksheet 9-39B: Increase allowance for uncollectible accounts (220,000) Increase to equal same % of trade accounts receivable as prior year. Increase accounts payable (1,070,000) Reflect same increase as cost of

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978-0134065823 P939b Excel

Stanton Enterprises Worksheet 9-39B Analysis of Financial Statements and Audit Planning Worksheet 12/31/2016 BALANCE SHEET Preliminary Audited % 12/31/16 % 12/31/15 %Change Cash $243,689 1.4 $133,981 1.1 81.9 Trade accounts receivable 3,544,009 19.7 2,224,921 17.7 59.3 Allowance for uncollectible accounts (120,000) -0.7 (215,000) -1.7 -44.2 Inventories 4,520,902 25.1 3,888,400 31.0 16.3 Prepaid expenses 29,500 0.2 24,700 0.2 19.4 Total current assets 8,218,100

Auditing and Assurance Services 16th Edition

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AC 28268

When communicating with the audit committee and management, A) only material fraud and illegal acts are required by auditing standards to be communicated. B) all internal control deficiencies are required by auditing standards to be communicated. C) the communications should be made in a timely manner to allow those charged with governance to

Auditing and Assurance Services 16th Edition

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AC 34107

Extensive professional development is necessary for auditors doing governmental audits. Answer: TRUE Answer: TRUE Answer: TRUE In process cost systems, costs are accumulated by individual jobs. Answer: FALSE Answer: FALSE Answer: FALSE The auditor must perform substantive tests related to assertions deemed to have significant risks. Answer: TRUE Answer: TRUE Answer: TRUE Because of the high cost of tests

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AC 50854

While there is no professional requirement to do so on audit engagements, CPAs frequently issue a formal "management" letter to clients. The primary purpose of this letter is to provide A) evidence indicating whether the auditor is reasonably certain that internal accounting control is operating as prescribed. B) a permanent record of the

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AC 78893

A high detection risk equates to a low amount of audit evidence needed. Answer: FALSE Answer: FALSE Answer: FALSE CPA firms are required to be independent when performing any professional service. Answer: FALSE Answer: FALSE Answer: FALSE For each significant internal control deficiency identified by the auditor, he or she should design one or more tests

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AC 83164

The last paragraph of the accountant's review report A) details the responsibilities of management. B) details the responsibilities of the accountant. C) expresses limited assurance in the form of negative assurance. D) lists the analytical procedures performed. Answer: C Answer: C Answer: C Audit procedures designed to uncover credit sales made after the client's fiscal year-end that relate

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AC 84238

Professional skepticism must be maintained only if the auditor suspects fraud. Answer: FALSE Answer: FALSE Answer: FALSE Auditors use trends in the accounts receivable turnover ratio to assess the reasonableness of the company's credit policies. Answer: FALSE Answer: FALSE Answer: FALSE Section 404 of the Sarbanes-Oxley Act requires public companies to have an external auditor attest

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Acc 26913

When errors are found in a sample, auditors in practice generally make the assumption A) that the population errors cannot be determined. B) that the population errors are larger than the sample errors. C) that the population errors are smaller than the sample errors. D) that the actual sample errors are representative of the

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ACC 27725

Staff assigned to an audit engagement must be knowledgeable about the client's industry. Answer: TRUE Answer: TRUE Answer: TRUE Current professional standards prohibit accountants from performing engagements to review forecasts or projections. Answer: TRUE Answer: TRUE Answer: TRUE It is common to use a combination of positive and negative confirmations by sending the latter to accounts

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Acc 27782

Current professional auditing standards require the performance of analytical procedures during the planning and completion phases of the audit. Answer: TRUE Answer: TRUE Answer: TRUE Depreciation amounts are determined by exchange transactions with outside parties. Answer: FALSE Answer: FALSE Answer: FALSE International Standards on Auditing are issued by the International Auditing and Assurance Standards Board (IAASB).

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ACC 48333

Which of the following is not a term related to evaluating results in audit sampling until after a sample is tested and evaluated? A) sample exception rate B) estimated population exception rate C) computed upper exception rate D) exception Answer: B Answer: B Answer: B Some companies have customers send payments directly to an address maintained by a

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ACC 54373

The auditors ultimate substantive tests depend on the relative effectiveness of internal controls related to accounts payable. Answer: TRUE Answer: TRUE Answer: TRUE For sales, the completeness transaction-related audit objective affects the existence balance-related audit objective. Answer: FALSE Answer: FALSE Answer: FALSE Auditors seldom expect to find misstatements when testing payroll transactions. Answer: TRUE Answer: TRUE Answer: TRUE When

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ACC 60730

To determine if significant internal control deficiencies are material weaknesses, they must be evaluated on their A) B) C) D) Answer: A Answer: A Answer: A Which of the following includes all payroll transactions processed by the accounting system for a given period of time? A) payroll journal B) payroll transaction file C) time report D) payroll summary Answer: B Answer: B Answer: B Which

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Acc 64373

Significant risks often relate to routine transactions. Answer: FALSE Answer: FALSE Answer: FALSE Significant changes in the industry may increase the risk of material misstatement at the assertion level. Answer: FALSE Answer: FALSE Answer: FALSE The cash account is not part of the acquisitions and payment cycle. Answer: FALSE Answer: FALSE Answer: FALSE To test for proper sales cutoff, an

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Acc 70608

Substantive analytical procedures performed during the testing phase of the audit A) are required under generally accepted auditing standards. B) are always done independently from other audit procedures. C) are used as a substantive test in support of account balances. D) do not need to be documented in the working papers. Answer: C Answer: C Answer:

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Acc 76789

Which of the following is a true statement regarding CPAs' liability? A) The amounts assessed under joint and several liability will not differ significantly from the amounts assessed under separate and proportionate liability. B) When lawsuits are brought under the federal securities laws, the joint and several liability approach will always apply. C)

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ACC 82513

Both SEC rules and the Sarbanes-Oxley Act prohibit auditors from providing bookkeeping services to their public company audit clients. Answer: TRUE Answer: TRUE Answer: TRUE All owners of a CPA firm must be CPAs who are qualified to practice. Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Errors are usually more difficult for an auditor to detect than

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ACC 86947

The letter of representation obtained from an audit client should be A) dated as of the end of the period under audit. B) dated as of the audit report date. C) dated as of any date decided upon by the client and auditor. D) dated as of the issuance of the financial statement. Answer:

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Acc 91836

A type of positive confirmation known as a blank confirmation A) requests the recipient to fill in the amount of the balance. B) is considered less reliable than the regular positive confirmation. C) generates as high a response rate as the regular positive confirmation form. D) is used when the auditor is confirming several

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ACC 95604

The sum of the tolerable exception rate and the estimated population exception rate is the precision of the initial sample estimate. Answer: FALSE Answer: FALSE Answer: FALSE Operational audits are often categorized as functional, organizational, or special assignments. Answer: TRUE Answer: TRUE Answer: TRUE Subsequent events represent events that occasionally occur after the balance sheet date,

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ACC 96926

A major consideration in audit staffing is the need for continuity from year to year. Answer: TRUE Answer: TRUE Answer: TRUE As the impact from noncompliance is further removed from affecting the financial statements, the less likely the auditor is to become aware of or recognize noncompliance when auditing the financial statements. Answer:

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Accounting 58765

The computer file used for recording payroll transactions for each employee and maintaining total wages paid for the year to date is the A) payroll transaction file. B) payroll master file. C) payroll bank account reconciliation. D) payroll tax returns. Answer: B Answer: B Answer: B The auditor generally decides whether the inventory count can be taken

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Accounting 62464

The risk of material misstatement refers to A) control risk and acceptable audit risk. B) inherent risk. C) the combination of inherent risk and control risk. D) inherent risk and audit risk. Answer: C Answer: C Answer: C Which of the following services is not prohibited by the SEC whenever a CPA also audits the company? A) actuarial

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Accounting Chapter 1 Which Of The Following Can Be Used As A Criteria For Evaluating

1 Answer: C Terms: Audit evidence Diff: Easy Objective: LO 1-1 AACSB: Reflective thinking 1 Answer: C Terms: Audit evidence Diff: Easy Objective: LO 1-1 AACSB: Reflective thinking 1 Answer: C Terms: Audit evidence Diff: Easy Objective: LO 1-1 AACSB: Reflective thinking Copyright 2017 Pearson Education, Inc. Copyright

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Accounting Chapter 10 Ineffective Board Director Audit Committee Oversight Over Financial

1 Answer: B Terms: Intentionally understate earnings; Reserve earnings Diff: Easy Objective: LO 10-1 AACSB: Reflective thinking 1 Answer: B Terms: Intentionally understate earnings; Reserve earnings Diff: Easy Objective: LO 10-1 AACSB: Reflective thinking 1 Answer: B Terms: Intentionally understate earnings; Reserve earnings Diff: Easy Objective: LO 10-1 AACSB:

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Accounting Chapter 10 The Auditor Should Obtain An Understanding Of The Internal

18 Answer: A Terms: Most effective way to prevent and deter fraud Diff: Moderate Objective: LO 10-4 AACSB: Reflective thinking 18 Answer: A Terms: Most effective way to prevent and deter fraud Diff: Moderate Objective: LO 10-4 AACSB: Reflective thinking 18 Answer: A Terms: Most effective way to prevent

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Accounting Chapter 11 Control Activities Are A Subcomponent Of The Information And Communication

21 Answer: FALSE Terms: COSO framework and control activities Diff: Moderate Objective: LO 11-3 AACSB: Reflective thinking 21 Answer: FALSE Terms: COSO framework and control activities Diff: Moderate Objective: LO 11-3 AACSB: Reflective thinking 21 Answer: FALSE Terms: COSO framework and control activities Diff: Moderate Objective: LO 11-3 AACSB:

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Accounting Chapter 11 Which Of The Following Is Not One Of The Three Primary Objectives Of Effective

1 Answer: B Terms: Internal controls Diff: Moderate Objective: LO 11-1 AACSB: Analytic thinking 1 Answer: B Terms: Internal controls Diff: Moderate Objective: LO 11-1 AACSB: Analytic thinking 1 Answer: B Terms: Internal controls Diff: Moderate Objective: LO 11-1 AACSB: Analytic thinking Copyright 2017 Pearson Education, Inc. Copyright

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Accounting Chapter 12 A Narrative Should Describe The Disposition Of Every Document And Record

1 Copyright 2017 Pearson Education, Inc. 1 Copyright 2017 Pearson Education, Inc. 1 Copyright 2017 Pearson Education, Inc. Auditing and Assurance Services, 16e (Arens/Elder/Beasley) Chapter 12 Assessing Control Risk and Reporting on Internal Controls 12.1 Learning Objective 12-1 1) When the auditor attempts to understand the operation

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Accounting Chapter 12 If When Obtaining Understanding Control Activities Relatively

13 Answer: FALSE Terms: Internal controls Diff: Moderate Objective: LO 12-3 AACSB: Analytic thinking 13 Answer: FALSE Terms: Internal controls Diff: Moderate Objective: LO 12-3 AACSB: Analytic thinking 13 Answer: FALSE Terms: Internal controls Diff: Moderate Objective: LO 12-3 AACSB: Analytic thinking Copyright 2017 Pearson Education, Inc. Copyright

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Accounting Chapter 13 Tests Of Controls Provide Evidence About The Likelihood For Misstatements

15 Answer: B Terms: Evidence mix Diff: Easy Objective: LO 13-3 AACSB: Reflective thinking 15 Answer: B Terms: Evidence mix Diff: Easy Objective: LO 13-3 AACSB: Reflective thinking 15 Answer: B Terms: Evidence mix Diff: Easy Objective: LO 13-3 AACSB: Reflective thinking Copyright 2017 Pearson Education, Inc. Copyright

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Accounting Chapter 13 Which Of The Following Further Audit Procedures Are Used To Determine Whether

1 Answer: D Terms: Not considered a further audit procedure Diff: Easy Objective: LO 13-1 AACSB: Reflective thinking 1 Answer: D Terms: Not considered a further audit procedure Diff: Easy Objective: LO 13-1 AACSB: Reflective thinking 1 Answer: D Terms: Not considered a further audit procedure Diff: Easy Objective:

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Accounting Chapter 14 List Below The Classes Of Transactions That You

1 Answer: TRUE Terms: Sales and collection cycle Diff: Moderate Objective: LO 14-1 AACSB: Reflective thinking 1 Answer: TRUE Terms: Sales and collection cycle Diff: Moderate Objective: LO 14-1 AACSB: Reflective thinking 1 Answer: TRUE Terms: Sales and collection cycle Diff: Moderate Objective: LO 14-1 AACSB: Reflective thinking Copyright

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Accounting Chapter 14 Transaction Related Audit Objectives For Credit Memos And

18 Answer: B Terms: Sales accurately recorded Diff: Moderate Objective: LO 14-3 AACSB: Reflective thinking 18 Answer: B Terms: Sales accurately recorded Diff: Moderate Objective: LO 14-3 AACSB: Reflective thinking 18 Answer: B Terms: Sales accurately recorded Diff: Moderate Objective: LO 14-3 AACSB: Reflective thinking Copyright 2017 Pearson Education,

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Accounting Chapter 15 An Auditor Can Increase The Likelihood That A Sample Is Representative

1 Answer: C Terms: Sample truly representative of population Diff: Easy Objective: LO 15-1 AACSB: Reflective thinking 1 Answer: C Terms: Sample truly representative of population Diff: Easy Objective: LO 15-1 AACSB: Reflective thinking 1 Answer: C Terms: Sample truly representative of population Diff: Easy Objective: LO 15-1 AACSB:

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Accounting Chapter 15 Ter Than For High Ter Answer A Terms Tolerable

19 Answer: A Terms: Assess control risk Diff: Easy Objective: LO 15-5 AACSB: Analytic thinking 19 Answer: A Terms: Assess control risk Diff: Easy Objective: LO 15-5 AACSB: Analytic thinking 19 Answer: A Terms: Assess control risk Diff: Easy Objective: LO 15-5 AACSB: Analytic thinking Copyright 2017 Pearson

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Accounting Chapter 16 For Cash Receipts, The Occurrence Transaction-related Audit Objective

1 Answer: C Terms: Sales and collection cycle Diff: Easy Objective: LO 16-1 AACSB: Reflective thinking 1 Answer: C Terms: Sales and collection cycle Diff: Easy Objective: LO 16-1 AACSB: Reflective thinking 1 Answer: C Terms: Sales and collection cycle Diff: Easy Objective: LO 16-1 AACSB: Reflective thinking

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Accounting Chapter 16 The Net Realizable Value Of Accounts Receivable Is Equal To

18 Answer: Confirmation of accounts selected from the trial balance is the most common test of details of balances for the accuracy of accounts receivable. When customers do not respond to confirmation requests, auditors examine supporting documents to verify shipment of goods and evidence of subsequent cash receipts to

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Accounting Chapter 17 An Increased Sample Size Will Always Cause The Population To Be Accepted

20 Answer: B Terms: Monetary unit sampling not effective at detecting Diff: Easy Objective: LO 17-3 AACSB: Reflective thinking 20 Answer: B Terms: Monetary unit sampling not effective at detecting Diff: Easy Objective: LO 17-3 AACSB: Reflective thinking 20 Answer: B Terms: Monetary unit sampling not effective at detecting

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Accounting Chapter 17 When Selecting A Sample Size For Substantive Tests Of Balances

1 Answer: A Terms: Sampling and nonsampling risks Diff: Easy Objective: LO 17-1 AACSB: Reflective thinking 1 Answer: A Terms: Sampling and nonsampling risks Diff: Easy Objective: LO 17-1 AACSB: Reflective thinking 1 Answer: A Terms: Sampling and nonsampling risks Diff: Easy Objective: LO 17-1 AACSB: Reflective thinking

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Accounting Chapter 18 D Terms Accounts Payable Cutoff Physical Inventory Before

19 Answer: When auditors intend to rely on controls to support a preliminary control risk assessment below maximum, the auditor performs tests of controls to obtain evidence that controls are operating effectively. As the operating effectiveness of controls improves and is supported by additional tests of controls, the auditor

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Accounting Chapter 18 The Personnel The Receiving Department Should Independent

1 Answer: A Terms: Acquisition and payment cycle and class of transactions Diff: Easy Objective: LO 18-1 AACSB: Reflective thinking 1 Answer: A Terms: Acquisition and payment cycle and class of transactions Diff: Easy Objective: LO 18-1 AACSB: Reflective thinking 1 Answer: A Terms: Acquisition and payment cycle and

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Accounting Chapter 19 Property, Plant, And Equipment Is Normally Audited In A Different Manner

16 Answer: Current-year acquisitions in the acquisitions schedule agree with related master file amounts, and the total agrees with the general ledger (detail tie-in). (1) Foot the acquisitions schedule, (2) trace the individual acquisitions to the master file for amounts and descriptions, and (3) trace the total to the

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Accounting Chapter 19 Which Is Not One Of The Tests That Would Be Used In

1 Answer: TRUE Terms: Acquisition and payment cycle Diff: Easy Objective: LO 19-1 AACSB: Reflective thinking 1 Answer: TRUE Terms: Acquisition and payment cycle Diff: Easy Objective: LO 19-1 AACSB: Reflective thinking 1 Answer: TRUE Terms: Acquisition and payment cycle Diff: Easy Objective: LO 19-1 AACSB: Reflective thinking

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Accounting Chapter 2 The Legal Right To Perform Audits Is Granted To A CPA Firm

1 Answer: B Terms: Sarbanes-Oxley and Securities Exchange Commission restrictions Diff: Moderate Objective: LO 2-1 AACSB: Reflective thinking Topic: SOX 1 Answer: B Terms: Sarbanes-Oxley and Securities Exchange Commission restrictions Diff: Moderate Objective: LO 2-1 AACSB: Reflective thinking Topic: SOX 1 Answer: B Terms: Sarbanes-Oxley and Securities Exchange Commission

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Accounting Chapter 2 Which Of The Following Is A True Statement Regarding Auditing

15 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 6) Which of the following is a true statement regarding auditing standards? A) Prior to the passage of Sarbanes-Oxley, the FASB established auditing principles for U.S. public companies. B) PCAOB auditing standards are

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Accounting Chapter 20 Auditors May Extend Their Tests Of Payroll In Which Of The Following

18 Answer: B Terms: Payroll and personnel cycle Diff: Moderate Objective: LO 20-3 AACSB: Reflective thinking 18 Answer: B Terms: Payroll and personnel cycle Diff: Moderate Objective: LO 20-3 AACSB: Reflective thinking 18 Answer: B Terms: Payroll and personnel cycle Diff: Moderate Objective: LO 20-3 AACSB: Reflective thinking

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Accounting Chapter 20 Which Of The Following Statements About The Payroll And Personnel Cycle

1 Answer: C 1 Answer: C 1 Answer: C Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Auditing and Assurance Services, 16e (Arens/Elder/Beasley) Chapter 20 Audit of the Payroll and Personnel Cycle 20.1 Learning Objective 20-1 1) Which of the

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Accounting Chapter 21 It Is Frequently Possible To Test The Physical Inventory Prior

19 Answer: D Terms: Tests of perpetual inventory master files Diff: Moderate Objective: LO 21-5 AACSB: Reflective thinking 19 Answer: D Terms: Tests of perpetual inventory master files Diff: Moderate Objective: LO 21-5 AACSB: Reflective thinking 19 Answer: D Terms: Tests of perpetual inventory master files Diff: Moderate Objective:

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Accounting Chapter 21 Receipt Of Ordered Materials By The Receiving Department Will Generate

1 Answer: D Terms: Reasons inventory is complex to audit Diff: Easy Objective: LO 21-1 AACSB: Reflective thinking 1 Answer: D Terms: Reasons inventory is complex to audit Diff: Easy Objective: LO 21-1 AACSB: Reflective thinking 1 Answer: D Terms: Reasons inventory is complex to audit Diff: Easy Objective:

Auditing and Assurance Services 16th Edition

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Accounting Chapter 22 Which Of The Following Owners’ Equity Transactions Usually Require

16 Answer: B Terms: Internal controls to maintain records of stock transactions and outstanding stock Diff: Moderate Objective: LO 22-3 AACSB: Reflective thinking 16 Answer: B Terms: Internal controls to maintain records of stock transactions and outstanding stock Diff: Moderate Objective: LO 22-3 AACSB: Reflective thinking 16 Answer: B

Auditing and Assurance Services 16th Edition

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Accounting Chapter 22 Which Of The Following Statements Is Correct Regarding The Capital Acquisition

1 Answer: C Terms: Capital acquisition and repayment cycle Diff: Easy Objective: LO 22-1 AACSB: Reflective thinking 1 Answer: C Terms: Capital acquisition and repayment cycle Diff: Easy Objective: LO 22-1 AACSB: Reflective thinking 1 Answer: C Terms: Capital acquisition and repayment cycle Diff: Easy Objective: LO 22-1 AACSB:

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Accounting Chapter 23 A Major Consideration In The Audit Of The General Cash Balance Is The

20 Answer: D Terms: Proof of cash Diff: Moderate Objective: LO 23-4 AACSB: Reflective thinking 20 Answer: D Terms: Proof of cash Diff: Moderate Objective: LO 23-4 AACSB: Reflective thinking 20 Answer: D Terms: Proof of cash Diff: Moderate Objective: LO 23-4 AACSB: Reflective thinking Copyright 2017 Pearson

Auditing and Assurance Services 16th Edition

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Accounting Chapter 23 Describe Each Of The Major Types Of Cash Accounts Maintained By Business

1 Answer: D Terms: Examination of imprest petty cash fund Diff: Moderate Objective: LO 23-1 AACSB: Analytic thinking 1 Answer: D Terms: Examination of imprest petty cash fund Diff: Moderate Objective: LO 23-1 AACSB: Analytic thinking 1 Answer: D Terms: Examination of imprest petty cash fund Diff: Moderate Objective:

Auditing and Assurance Services 16th Edition

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Accounting Chapter 24 Accounting Standards Describe Three Levels Likelihood Occurrence

1 Answer: C Terms: Presentation and disclosure-related objectives Diff: Easy Objective: LO 24-1 AACSB: Reflective thinking 1 Answer: C Terms: Presentation and disclosure-related objectives Diff: Easy Objective: LO 24-1 AACSB: Reflective thinking 1 Answer: C Terms: Presentation and disclosure-related objectives Diff: Easy Objective: LO 24-1 AACSB: Reflective thinking

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Accounting Chapter 24 Analytic Thinking The Auditors Responsibility With Respect

21 Answer: B Terms: Subsequent events; Adjustment to financial statements Diff: Easy Objective: LO 24-4 AACSB: Analytic thinking 21 Answer: B Terms: Subsequent events; Adjustment to financial statements Diff: Easy Objective: LO 24-4 AACSB: Analytic thinking 21 Answer: B Terms: Subsequent events; Adjustment to financial statements Diff: Easy Objective:

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Accounting Chapter 24 Which The Following Statements Correct A Letter

35 Answer: C Terms: Client representations signed by Diff: Easy Objective: LO 24-5 AACSB: Reflective thinking 35 Answer: C Terms: Client representations signed by Diff: Easy Objective: LO 24-5 AACSB: Reflective thinking 35 Answer: C Terms: Client representations signed by Diff: Easy Objective: LO 24-5 AACSB: Reflective thinking

Auditing and Assurance Services 16th Edition

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Accounting Chapter 25 CPAS Are Attesting The Accuracy The Prospective

18 Answer: TRUE Terms: SSAEs Diff: Easy Objective: LO 25-3 AACSB: Reflective thinking 18 Answer: TRUE Terms: SSAEs Diff: Easy Objective: LO 25-3 AACSB: Reflective thinking 18 Answer: TRUE Terms: SSAEs Diff: Easy Objective: LO 25-3 AACSB: Reflective thinking Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc.

Auditing and Assurance Services 16th Edition

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Accounting Chapter 25 Typically This Type Statement Used Primarily For Management

1 Answer: B Terms: Preparation, compilation, and review engagements; SSARS standards Diff: Easy Objective: LO 25-1 AACSB: Reflective thinking 1 Answer: B Terms: Preparation, compilation, and review engagements; SSARS standards Diff: Easy Objective: LO 25-1 AACSB: Reflective thinking 1 Answer: B Terms: Preparation, compilation, and review engagements; SSARS standards

Auditing and Assurance Services 16th Edition

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Accounting Chapter 26 False Terms International Standards For The Professional Practice

1 Answer: C Terms: Internal auditors' responsibilities Diff: Easy Objective: LO 26-1 AACSB: Reflective thinking 1 Answer: C Terms: Internal auditors' responsibilities Diff: Easy Objective: LO 26-1 AACSB: Reflective thinking 1 Answer: C Terms: Internal auditors' responsibilities Diff: Easy Objective: LO 26-1 AACSB: Reflective thinking Copyright 2017 Pearson

Auditing and Assurance Services 16th Edition

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Accounting Chapter 26 Special Assignments Special Assignment Audits Arise The

12 Answer: C Terms: Objective of operational audit Diff: Moderate Objective: LO 26-3 AACSB: Reflective thinking 12 Answer: C Terms: Objective of operational audit Diff: Moderate Objective: LO 26-3 AACSB: Reflective thinking 12 Answer: C Terms: Objective of operational audit Diff: Moderate Objective: LO 26-3 AACSB: Reflective thinking

Auditing and Assurance Services 16th Edition

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Accounting Chapter 3 Management Discloses The Notes The Financial Statements

53 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 19) Smith and Jones, CPAs, audited the consolidated financial statements of Concord Inc. and all but one of its subsidiaries for the year ended September 30, 2016 and are expressing an unqualified opinion

Auditing and Assurance Services 16th Edition

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Accounting Chapter 3 No Reference Is Made In The Auditor’s Report To Other Auditors Who

21 Answer: D Terms: Justified Departure Diff: Moderate Objective: LO 3-4 AACSB: Reflective thinking 21 Answer: D Terms: Justified Departure Diff: Moderate Objective: LO 3-4 AACSB: Reflective thinking 21 Answer: D Terms: Justified Departure Diff: Moderate Objective: LO 3-4 AACSB: Reflective thinking Copyright 2017 Pearson Education, Inc. Copyright

Auditing and Assurance Services 16th Edition

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Accounting Chapter 3 The Appropriate Audit Report Date For A Standard Unmodified Opinion

1 Answer: A Terms: Auditing standards require audit report title Diff: Easy Objective: LO 3-1 AACSB: Reflective thinking 1 Answer: A Terms: Auditing standards require audit report title Diff: Easy Objective: LO 3-1 AACSB: Reflective thinking 1 Answer: A Terms: Auditing standards require audit report title Diff: Easy Objective:

Auditing and Assurance Services 16th Edition

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Accounting Chapter 3 The Receivable Significantly Material In Relation The Financial

41 Answer: C Terms: Materiality qualifications Diff: Moderate Objective: LO 3-6 AACSB: Reflective thinking 41 Answer: C Terms: Materiality qualifications Diff: Moderate Objective: LO 3-6 AACSB: Reflective thinking 41 Answer: C Terms: Materiality qualifications Diff: Moderate Objective: LO 3-6 AACSB: Reflective thinking Copyright 2017 Pearson Education, Inc. Copyright

Auditing and Assurance Services 16th Edition

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Accounting Chapter 4 Jernigan Corporation For The Year Ended December

34 Answer: A Terms: Fee arrangements not a violation of AICPA Code of Professional Conduct Diff: Challenging Objective: LO 4-7 AACSB: Ethical understanding and reasoning 34 Answer: A Terms: Fee arrangements not a violation of AICPA Code of Professional Conduct Diff: Challenging Objective: LO 4-7 AACSB: Ethical understanding and

Auditing and Assurance Services 16th Edition

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Accounting Chapter 4 Scope And Nature Services Member Public Practice

1 Answer: TRUE Terms: Ethical Principles Diff: Easy Objective: LO 4-1 AACSB: Ethical understanding and reasoning 1 Answer: TRUE Terms: Ethical Principles Diff: Easy Objective: LO 4-1 AACSB: Ethical understanding and reasoning 1 Answer: TRUE Terms: Ethical Principles Diff: Easy Objective: LO 4-1 AACSB: Ethical understanding and reasoning

Auditing and Assurance Services 16th Edition

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Accounting Chapter 4 Which Of The Following Circumstances Impairs An Auditor’s Independence

21 Answer: B Terms: SEC and allowed services Diff: Challenging Objective: LO 4-5 AACSB: Ethical understanding and reasoning 21 Answer: B Terms: SEC and allowed services Diff: Challenging Objective: LO 4-5 AACSB: Ethical understanding and reasoning 21 Answer: B Terms: SEC and allowed services Diff: Challenging Objective: LO 4-5

Auditing and Assurance Services 16th Edition

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Accounting Chapter 5 Reflective Thinking One Significant Result The Escott

20 Answer: A Terms: Major conclusion of 1931 Ultramares case Diff: Moderate Objective: LO 5-5 AACSB: Reflective thinking 20 Answer: A Terms: Major conclusion of 1931 Ultramares case Diff: Moderate Objective: LO 5-5 AACSB: Reflective thinking 20 Answer: A Terms: Major conclusion of 1931 Ultramares case Diff: Moderate Objective:

Auditing and Assurance Services 16th Edition

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Accounting Chapter 5 Some States Not Distinguish Between Ordinary And Gross

1 Answer: Major factors include: The growing awareness of the responsibilities of public accountants by users of financial statements An increased consciousness on the part of the Securities and Exchange Commission regarding its responsibility for protecting investors' interests The complexity of auditing and accounting functions caused by the increasing

Auditing and Assurance Services 16th Edition

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Accounting Chapter 6 All Of Which Are Tests Of Transactions Associated With The Audit Of

35 Answer: 1. (1) D (2) X 2. (1) C (2) X 3. (1) F (2) Z 4. (1) B (2) W 5. (1) A (2) V Terms: Management assertions and transaction-related audit objectives Diff: Challenging Objective: LO 6-9 AACSB: Analytic thinking 35 Answer: 1. (1) D (2) X

Auditing and Assurance Services 16th Edition

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Accounting Chapter 6 Generally The Auditor Under Obligation Notify Parties

1 Answer: D Terms: Auditors accumulate evidence Diff: Easy Objective: LO 6-1 AACSB: Reflective thinking 1 Answer: D Terms: Auditors accumulate evidence Diff: Easy Objective: LO 6-1 AACSB: Reflective thinking 1 Answer: D Terms: Auditors accumulate evidence Diff: Easy Objective: LO 6-1 AACSB: Reflective thinking Copyright 2017 Pearson

Auditing and Assurance Services 16th Edition

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Accounting Chapter 6 Which Of The Following Is Not A Step In The Professional Judgment

21 Answer: B Terms: Professional judgment process Diff: Easy Objective: LO 6-5 AACSB: Reflective thinking 21 Answer: B Terms: Professional judgment process Diff: Easy Objective: LO 6-5 AACSB: Reflective thinking 21 Answer: B Terms: Professional judgment process Diff: Easy Objective: LO 6-5 AACSB: Reflective thinking Copyright 2017 Pearson Education,

Auditing and Assurance Services 16th Edition

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Accounting Chapter 7 State The Three Phases Of The Audit Where Analytical Procedures Can Be

33 Answer: B Terms: Analytical analysis; comparison of client and industry data Diff: Moderate Objective: LO 7-5 AACSB: Reflective thinking 33 Answer: B Terms: Analytical analysis; comparison of client and industry data Diff: Moderate Objective: LO 7-5 AACSB: Reflective thinking 33 Answer: B Terms: Analytical analysis; comparison of client

Auditing and Assurance Services 16th Edition

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Accounting Chapter 7 When The Auditor Scans The Sales Journal Looking For Large And Unusual

21 Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc. 24) When the auditor scans the sales journal looking for large and unusual transactions, he is gathering what type of evidence? A) inspection B) recalculation C) physical examination D) analytical procedures Answer: D

Auditing and Assurance Services 16th Edition

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Accounting Chapter 7 Which Of The Following Is An Accurate Statement Regarding Audit Evidence

1 Answer: TRUE Terms: Nature of audit evidence Diff: Easy Objective: LO 7-1 AACSB: Reflective thinking 1 Answer: TRUE Terms: Nature of audit evidence Diff: Easy Objective: LO 7-1 AACSB: Reflective thinking 1 Answer: TRUE Terms: Nature of audit evidence Diff: Easy Objective: LO 7-1 AACSB: Reflective thinking Copyright

Auditing and Assurance Services 16th Edition

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Accounting Chapter 8 A Measure Of How Willing The Auditor Is To Accept That The Financial Statements

1 Answer: D Terms: Risk of material misstatements Diff: Easy Objective: LO 8-1 AACSB: Reflective thinking 1 Answer: D Terms: Risk of material misstatements Diff: Easy Objective: LO 8-1 AACSB: Reflective thinking 1 Answer: D Terms: Risk of material misstatements Diff: Easy Objective: LO 8-1 AACSB: Reflective thinking Copyright

Auditing and Assurance Services 16th Edition

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Accounting Chapter 8 Preliminary Materiality Should Allocated Income Statement Accounts

35 Answer: B Terms: Materiality Diff: Moderate Objective: LO 8-6 AACSB: Reflective thinking 35 Answer: B Terms: Materiality Diff: Moderate Objective: LO 8-6 AACSB: Reflective thinking 35 Answer: B Terms: Materiality Diff: Moderate Objective: LO 8-6 AACSB: Reflective thinking Copyright 2017 Pearson Education, Inc. Copyright 2017 Pearson Education, Inc.

Auditing and Assurance Services 16th Edition

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Accounting Chapter 8 What Are These Reasons Answer The Three Reasons

21 Answer: TRUE Terms: Communications between predecessor and successor auditors Diff: Moderate Objective: LO 8-2 AACSB: Reflective thinking 21 Answer: TRUE Terms: Communications between predecessor and successor auditors Diff: Moderate Objective: LO 8-2 AACSB: Reflective thinking 21 Answer: TRUE Terms: Communications between predecessor and successor auditors Diff: Moderate Objective:

Auditing and Assurance Services 16th Edition

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Accounting Chapter 9 Which Of The Following Would Not Increase The Risks Of Material

1 Answer: D Terms: Inherent risk Diff: Moderate Objective: LO 9-1 AACSB: Reflective thinking 1 Answer: D Terms: Inherent risk Diff: Moderate Objective: LO 9-1 AACSB: Reflective thinking 1 Answer: D Terms: Inherent risk Diff: Moderate Objective: LO 9-1 AACSB: Reflective thinking Copyright 2017 Pearson Education, Inc. Copyright

Auditing and Assurance Services 16th Edition

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Accounting Chapter 9 Inherent Risk Dependent Upon The Strengths Clients

14 Answer: 1. decrease 2. increase 3. decrease 4. decrease 5. decrease Terms: Relationships among acceptable audit risk, inherent risk, control risk, planned detection risk, and tolerable misstatement with planned evidence Diff: Moderate Objective: LO 9-5 AACSB: Analytic thinking 14 Answer: 1. decrease 2. increase 3. decrease 4. decrease

Auditing and Assurance Services 16th Edition

Exam Prep

ACCT 10957

An auditor must evaluate a specialist's professional qualifications and understand the objectives of the specialist's work. Answer: TRUE Answer: TRUE Answer: TRUE The starting point for the verification of the balance in the general bank account is to obtain a bank cut-off statement. Answer: FALSE Answer: FALSE Answer: FALSE When there are a number of controls

Auditing and Assurance Services 16th Edition

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ACCT 13240

Which one of the following duties should not be assigned the purchases department? A) finding the lowest cost vendor B) reviewing vendors' catalog descriptions and prices for standardized items C) designing the purchase order form D) authorizing the acquisition of goods Answer: D Answer: D Answer: D When an auditor is trying to determine how changes can

Auditing and Assurance Services 16th Edition

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Acct 17675

The estimated unpaid obligations for services or benefits that have been received before the balance sheet date are A) accounts payable. B) accounts receivable. C) unearned liabilities. D) accrued liabilities. Answer: D Answer: D Answer: D Which ratio is computed by dividing operating income by net sales? A) gross profit percent B) profit margin C) return on sales D) return on assets

Auditing and Assurance Services 16th Edition

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ACCT 18835

Auditing and Assurance Services 16th Edition

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Acct 26976

Several factors influence the auditor's choice of the types of tests to select, including A) the availability of the types of evidence. B) the relative costs of each type of test. C) the effectiveness of the internal controls. D) all of the above. Answer: D Answer: D Answer: D Which of the following components of the control

Auditing and Assurance Services 16th Edition

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ACCT 28413

A primary concern in reporting on a comprehensive basis is to make sure that the statements clearly indicate that they are prepared on a basis other than GAAP. Answer: TRUE Answer: TRUE Answer: TRUE Cutoff for acquisitions of insurance is normally not a significant problem for the auditors. Answer: TRUE Answer: TRUE Answer: TRUE Failure to

Auditing and Assurance Services 16th Edition

Exam Prep

ACCT 32503

The bank reconciliation A) must be done on a daily basis if the client uses electronic banking. B) should be performed by someone independent of the handling or recording of cash receipts. C) should be performed by someone who handles cash disbursements. D) ensures that no cash has been embezzled. Answer: B Answer: B Answer: B Which

Auditing and Assurance Services 16th Edition

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ACCT 35231

Fraud is more prevalent in large businesses than small businesses and not-for-profit organizations. Answer: FALSE Answer: FALSE Answer: FALSE Statutory laws are laws that have been developed through court decisions rather than through the U.S. Congress and other governmental units. Answer: FALSE Answer: FALSE Answer: FALSE Sales returns and allowances are often ignored by auditors because

Auditing and Assurance Services 16th Edition

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ACCT 43512

In testing acquisitions the auditor needs to understand the appropriate accounting guidance related to acquisition accounting. Which of the following is not an accounting consideration for the auditor as regards to acquisition cost? A) inclusion of material transportation and installation costs B) recording of trade-in costs C) allocating costs when building and equipment are

Auditing and Assurance Services 16th Edition

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Acct 45052

When analytical procedures reveal unusual fluctuations in an account balance, the auditor will probably perform fewer tests of details for that account and increase the tests of controls related to the account. Answer: FALSE Answer: FALSE Answer: FALSE Companies using e-commerce systems to transact business electronically do not need to be concerned about how

Auditing and Assurance Services 16th Edition

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Acct 50917

After the accrual and property tax expense for each piece of property has been recalculated, the totals are added and compared with the general ledger. Answer: TRUE Answer: TRUE Answer: TRUE Deviation refers to a departure from prescribed controls or amounts that are not monetarily correct. Answer: FALSE Answer: FALSE Answer: FALSE The standard of due

Auditing and Assurance Services 16th Edition

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Acct 51027

Which of the following statements is correct regarding the audit of inventory cost accounting? A) Cost accounting systems and controls are the same for all manufacturing companies. B) All companies that have work-in-process must use a perpetual inventory system. C) Auditors test perpetual inventory master files by examining documentation that supports additions and

Auditing and Assurance Services 16th Edition

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ACCT 58302

When a successor auditor requests information from a company's previous auditor, and there are legal problems or disputes between the client and the predecessor auditor, the predecessor auditor's response to the new auditor may be limited to stating that no information will be provided. Answer: TRUE Answer: TRUE Answer: TRUE The estimation of

Auditing and Assurance Services 16th Edition

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ACCT 61841

Statistical sampling eliminates any professional judgment for the auditor. Answer: FALSE Answer: FALSE Answer: FALSE In the scope paragraph of the audit report issued for financial statements of a nonpublic company, the auditor expresses an opinion about the internal controls of the company. Answer: FALSE Answer: FALSE Answer: FALSE According to the Association of Certified Fraud

Auditing and Assurance Services 16th Edition

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Acct 63847

If an auditor concludes there are contingent liabilities, then he or she must evaluate the A) B) C) D) Answer: A Answer: A Answer: A The auditor must gather sufficient and appropriate evidence during the course of the audit. Sufficient evidence must A) be well documented and cross-referenced in the audit documents. B) be based on sources that are external

Auditing and Assurance Services 16th Edition

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ACCT 69617

The primary concern in determining whether retained earnings is correctly disclosed on the balance sheet is A) correct calculation of the net income or loss for the year. B) correct calculation of dividend payments for the year. C) whether prior-period adjustments have been made correctly. D) whether there are any restrictions on the payment

Auditing and Assurance Services 16th Edition

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Acct 71662

If, when obtaining an understanding of control activities of a relatively small client, the auditor identified no control activities, the auditor would probably set a high assessment of control risk. Answer: TRUE Answer: TRUE Answer: TRUE Depreciation expense is normally verified as a part of tests of details of balances rather than as part

Auditing and Assurance Services 16th Edition

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ACCT 72465

The ________ is helpful in preventing classification errors if it accurately describes which type of transaction should be in each account. A) general ledger B) general journal C) trial balance D) chart of accounts Answer: D Answer: D Answer: D Interpretations of the rules regarding independence allow an auditor to serve as A) a director or officer of

Auditing and Assurance Services 16th Edition

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Acct 77254

Which of the following subsequent events is most likely to result in an adjustment to a company's financial statements? A) merger or acquisition activities B) bankruptcy (due to deteriorating financial condition) of a customer with an outstanding accounts receivable balance C) issuance of common stock D) an uninsured loss of inventories due to a

Auditing and Assurance Services 16th Edition

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ACT 50809

Determining if the financial instruments included in the schedule of investment activity at year-end are stated at appropriate amounts in accordance with accounting standards is the balance-related audit objective of A) materiality. B) realizable value. C) consistency. D) classification. Answer: B Answer: B Answer: B When labor is a significant part of inventory, verifying the proper accounting of

Auditing and Assurance Services 16th Edition

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ACT 51798

What is the best reason that standards prohibit accepting an engagement on a projection for general use? A) The CPA's procedures would violate SSARS. B) Reports on projections are not well understood by the general public. C) Underlying hypothetical assumptions are difficult to interpret without obtaining additional information. D) The CPA is not qualified to

Auditing and Assurance Services 16th Edition

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ACT 58284

The auditors determine which disclosures must be presented in the financial statements. Answer: FALSE Answer: FALSE Answer: FALSE The phrase "Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material error" is included in the auditor's opinion section of an audit

Auditing and Assurance Services 16th Edition

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ACT 67094

Which of the following is a reason that the auditors may change the preliminary judgment about materiality? A) The auditors decide that the preliminary judgment was too large. B) The auditors decide that the preliminary judgment was too small. C) Client circumstance may have changed due to qualitative events. D) all of the above

Auditing and Assurance Services 16th Edition

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ACT 73889

Auditing standards indicate that reasonable assurance is a moderate, but not absolute, level of assurance that the financial statements are free of material misstatement. Answer: FALSE Answer: FALSE Answer: FALSE LANs link equipment within a single or small cluster of buildings and are used within a company. Answer: TRUE Answer: TRUE Answer: TRUE It is generally impractical

Auditing and Assurance Services 16th Edition

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ACT 80381

Because they spend all their time within one company, internal auditors have much greater knowledge about the company's operations and internal controls then external auditors. Answer: TRUE Answer: TRUE Answer: TRUE If the preliminary judgment of materiality increases, the amount of audit evidence required will decrease. Answer: TRUE Answer: TRUE Answer: TRUE If employees have positive

Auditing and Assurance Services 16th Edition

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MET MG 12800

An individual who is not party to the contract between a CPA and the client, but who is known by both and is intended to receive certain benefits from the contract is known as A) a third party. B) a common law inheritor. C) a tort. D) a third-party beneficiary. Answer: D Answer: D Answer: D A

Auditing and Assurance Services 16th Edition

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MET MG 31155

Auditing standards require that the auditor evaluate whether there is a substantial doubt about a client's ability to continue as a going concern for at least A) one quarter beyond the balance sheet date. B) one quarter beyond the date of the auditor's report. C) one year beyond the balance sheet date. D) one

Auditing and Assurance Services 16th Edition

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MET MG 35134

The objective of the audit of financial statements by an independent auditor is to verify that the financial statements are free of misstatements and accurately represent the company's financial position and results of operations. Answer: FALSE Answer: FALSE Answer: FALSE Analytical procedures may be used to assess the year-end balances for financial instruments.

Auditing and Assurance Services 16th Edition

Exam Prep

MET MG 57721

When customers purchase goods by credit card, the issuer of the credit card uses EFT to transfer funds into the company's bank account. Answer: TRUE Answer: TRUE Answer: TRUE The three most important audit objectives for cash are accuracy, existence, and classification. Answer: FALSE Answer: FALSE Answer: FALSE Auditing standards require that records for audits of private

Auditing and Assurance Services 16th Edition

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SMG AC 23214

The auditor's tests for proper cutoff of current year acquisitions of property, plant, and equipment are usually done as part of accounts payable cutoff tests. Answer: TRUE Answer: TRUE Answer: TRUE Auditors are allowed to have an indirect financial interest in an audit client, such as ownership of stock in a client's company

Auditing and Assurance Services 16th Edition

Exam Prep

SMG AC 29276

When assessing the risk of material misstatements in the financial statements, A) inadequate internal control procedures will mitigate client business risk. B) GAAS specifies in detail how much and what types of evidence the auditor needs to obtain. C) company management is responsible for determining materiality levels. D) the auditor must have an understanding

Auditing and Assurance Services 16th Edition

Exam Prep

SMG AC 43220

When determining whether independence is impaired because of an ownership interest in a client company, materiality will affect ownership A) in all circumstances. B) only for direct ownership. C) only for indirect ownership. D) under no circumstances. Answer: C Answer: C Answer: C An example of a breach of contract would likely include A) an auditor's refusal to

Auditing and Assurance Services 16th Edition

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SMG AC 43233

Match six of the terms (a-l) with the definitions provided below (1-6): a. acceptable risk of incorrect acceptance b. acceptable risk of incorrect rejection c. difference estimation d. misstatement bounds e. monetary unit sampling f. mean-per-unit estimation g. point estimate h. probability proportional to size sample selection i. ratio estimation j. statistical inferences k. stratified sampling l. variable sampling ________ 1. conclusions drawn

Auditing and Assurance Services 16th Edition

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