12. Evidence - The Purchases, Inventory, Payroll, and Other Cycles Flashcards
What is the occurrence assertion for equity transactions?
That they actually occurred as reported in the balance sheet.
What alleviates the primary concern that all capital stock transactions are properly authorized?
That all entries in the capital stock account should be vouched to the minutes of the board of directors’ meetings.
What does the auditor need to do if the client uses statistical sampling to determine inventory quantities?
The auditor should become satisfied by performing alternative audit procedures.
What does testing the assertion of rights and obligations for inventories determine?
That the entity has legal title or similar rights to the inventories.
Assertions about accuracy, valuation, and allocation address
Whether (1) assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and (2) resulting adjustments are properly recorded.
What is the cutoff assertion?
That all transactions and events have been recorded in the proper period.
The auditor can best verify a client’s bond sinking-fund transactions and year-end balance by
Confirmation with the bond trustee.
An audit of owner’s equity normally would not include
Detail checking from the dividend payment list to the capital stock records.
A company owns a 30% voting interest in another entity. They did not elect the fair value option. What would be most appropriate way to to obtain audit evidence pertaining to the annual measurement of the investment?
Audited financial statements of the investee are usually sufficient appropriate evidence regarding the investor’s equity.
However, the auditor should satisfy the requirements either for (1) referring to the component auditor in the auditor’s report or (2) assuming responsibility for the work of the component auditor (AU-C 600).
The auditor should insist that a representative of the client be present during the physical examination of securities to
Acknowledge the receipt of securities returned.
How does an auditor usually determine whether dividend income from publicly-held investments is reasonable?
By referring to records produced by investment services.
What is the primary audit risk for accounts payable?
The understatement of the liability. The auditor should focus on completeness
