5.30 (Medium) Sufficient appropriate audit evidence has not been obtained to support the conclusions. | | Procedures | General point | Quality (appropriate evidence) | Quantity (sufficient) | (a) | Observation of stock take - went according to instructionsInventory test counts and cut-off prove satisfactory. | To conclude that the ACCOUNT balance is fairly stated (i.e. in $$ terms), all material assertions must be verified. | Existence assertion (an overstatement test) has been tested from the stock sheet to the floor (one direction).Test counts should also have been selected from the factory floor and checked to the client’s inventory sheets to test for the assertion of completeness (an understatement test in the other direction). Quantities must be tested BOTH ways. | No work has been carried out on the valuation and allocation assertion. Auditor cannot come to the conclusion that the Inventory is fairly stated without * an understatement test of quantities and * then work on the valuation e.g. Q x P = Value i.e. cost of products using accounting policy, and then * testing the provision for obsolescence | (b) | Tests of control (sales prices to selling price list) revealed 3 / 20 were not checked by sales clerk, despite the prices being matched without error. | The test of control is checking for existence and effectiveness of the control. | Failing to complete the ‘prices checked’ box means that there were 3 deviations out of 20 for the test of existence of the control. The fact that the prices were correct is not relevant when checking the existence of the control. | * It could be concluded that there is already enough evidence to say that the control is not working. * A lot depends on the definition of a 'deviation=error'. * If the error had to include an incorrect price a bigger sample would have be drawn before a conclusion could be reached. | (c) | Post-balance sheet sales returns of Product 75l were noted as large in number.
An audit which conducted in between the two annual audits with a view to find out interim profits to enable the company to declare an interim dividend is known as Interim Audit. It is a kind of audit which is conducted between the two periodical or balance sheet audits.
Objectives Of Interim Audit
1. To know profit or loss of interim period.
2. To distribute interim dividend.
3. To get loan on the basis of interim account.
4. To get information about the financial position….
which exceeds materiality of $50,000.
c. The auditor should either propose an audit adjustment so that the unadjusted statement amount is less than materiality, and/or perform more testing to obtain a better estimate of the population misstatements. The additional testing will likely focus on receivables and inventory because they have the largest estimated misstatements.
9-28 a. The following terms are audit planning decisions requiring professional judgment:
Preliminary judgment about materiality….
of lawsuits on audit firms.
2. Describe the causes of legal action against auditors and identify parties that may sue auditors.
3. Explain the impact of key court cases on the public accounting profession.
4. Describe auditor liability, discuss auditor responsibilities, identify possible auditor defences, and discuss possible remedies and sanctions available under both common law and statutory law.
5. Identify professional requirements that help assure audit quality and minimise….
Fundamental concepts of f/s audit
Materiality misstatement of accounting information. is a matter of professional judgment
Audit risk The auditor expresses an inappropriate audit opinion when the financial statements are materially misstated, Evidence (more than “per discussion with client)
Major phrases of audit:
Client acceptance/continuance; Preliminary engagement activities; Establish materiality and assess risks; Plan the audit ;Consider and audit internal control; Audit business processes and….
Q1 - What is the relationship between the risk assessment process and the collection of audit evidence?
The risk assessment process happens at the very beginning of the engagement and is to determine the level of risk present in the company. The risk assessment phase is when the auditor assess the client’s situation, conducts an independence threat analysis and decides whether to accept the client or not. The risk assessment is influenced by various factors such as the degree to which external….
Accounting Education: an international journal Vol. 20, No. 2, 203– 222, April 2011
Adding Value to Audit Education through ‘Living’ Cases
University of Huddersﬁeld, UK Received: November 2009 Revised: July 2010 Accepted: September 2010
ABSTRACT This paper seeks to address the perceived failure of university teaching to foster critical understanding of audit practice and to identify a potential remedy. It contributes to the debate (Maltby, 2001, “Second thoughts about ‘Cases in….
456 Chapter Eleven
Illustrative Audit Case: Keystone Computers & Networks, Inc.
Part III: Substantive Tests—Accounts Receivable and Revenue
This part of the audit case illustrates the manner in which the auditors design substantive tests of balances. The substantive tests are illustrated for two accounts—receivables and revenue. This aspect of the audit is illustrated with the following audit documentation: • ABC’s risk assessment working paper that combines the auditors’ assessments….
D. Expected effectiveness of controls.
13. The risk that an auditor’s procedures will lead to the conclusion that a material misstatement does not exist in an account balance when, in fact, such misstatement does exist is referred to as
A. Audit risk
B. Inherent risk
C. Control risk
D. Detection risk
14. Evidential matter concerning proper segregation of duties ordinarily is best obtained by
A. Preparation of a flowchart of duties performed by available personnel.
B. Inquiring whether….
How many records are there in database?
There are 147 records in the paycheck file.
How many data validity errors are there in the database?
There were no validity errors in the database; all records are entered into the system, thus makes it all valid.
What are the following totals?
Gross Pay (TOTAL_GROS) = 178,831
Taxes withheld (TOTAL_TAXE) = 36,584
Deductions withheld (TOTAL_DEDU) = 24,947
Net Pay (NET_PAY) = 117,292