Audit Evidence - Specific Audit Areas Flashcards
An auditor’s purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management’s assertions about
A. Existence or occurrence.
B. Presentation and disclosure.
C. Completeness.
D. Valuation or allocation.
B. Presentation and disclosure.
A note payable that is renewed after the balance sheet date would be examined by the auditor in order to ensure that it was properly presented at the balance sheet date and that related disclosures were adequate. This would provide the auditor with evidence for the presentation and disclosure assertions.
When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be
A. Vendors with whom the entity has previously done business.
B. Amounts recorded in the accounts payable subsidiary ledger.
C. Payees of checks drawn in the month after the year end.
D. Invoices filed in the entity’s open invoice file.
A. Vendors with whom the entity has previously done business.
In auditing the completeness assertion for accounts payable, the auditor is concerned about the possible understatement of accounts payable. The appropriate population for a confirmation effort would, therefore, be vendors with whom the entity has previously done business, in order to try to identify unrecorded payables.
In testing plant and equipment balances at the end of the period, an auditor examines new additions listed on an analysis of plant and equipment. This procedure most likely obtains evidence concerning management’s assertion of
A. Completeness.
B. Existence.
C. Rights and obligations.
D. Valuation and allocation.
B. Existence.
Examination of new plant and equipment additions (by vouching from the accounting records to the physical items) provides evidence about existence.
In testing for unrecorded retirements of equipment, an auditor most likely would
A. Select items of equipment from the accounting records and then locate them during the plant tour.
B. Compare depreciation journal entries with similar prior-year entries in search of fully depreciated equipment.
C. Inspect items of equipment observed during the plant tour and then trace them to the equipment subsidiary ledger.
D. Scan the general journal for unusual equipment additions and excessive debits to repairs and maintenance expense.
A. Select items of equipment from the accounting records and then locate them during the plant tour.
In order to find unrecorded retirements, the auditor must first identify in the records which assets are most likely to have been retired. For example, older assets are more likely to have been retired. The auditor may then attempt to locate such items in the plant. If the items are missing from the plant, the auditor will have found unrecorded retirements.
