Audit Procedures By Transaction Cycly Flashcards
An auditor’s principal objective in analyzing repairs and maintenance expense accounts is to:
Discover expenditures that were expensed but should have been capitalized
An auditor generally tests the segregation of duties related to inventory by:
Personal inquiry and observation
The most reliable procedure for an auditor to use to test the existence of a client’s inventory at an outside location would be to:
Observe physical counts of the inventory items.
Which of the following procedures would be most appropriate for testing the completeness assertion as it applies to inventory?
Performing cutoff procedures for shipping and receiving.
The client will likely have created phony sales invoices, but no related shipment will have occurred.
How a client would record fictitious sales
Consists of the underlying accounting data and all corroborating information available to the auditor. A client’s accounting data by itself is not considered sufficient audit evidence to support the financial statements.
Audit evidence
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:
Understandability and classification.
- Measure the effects of past transactions that cannot be determined in a timely cost-effective manner.
- Measure the effects of the present status of an asset or
- Be used to approximate an account pending the outcome of a future event (e.g., uncollectible accounts receivable).
Accounting Estimates
Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the receivables:
Existence
Two assertions for which confirmation of accounts receivable balances provides primary evidence are:
Rights and Obligations and Existence
Generally used to ascertain the reasonableness of investment income in relationship to the amount invested.
Analytical review
In testing long-term investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the:
Completeness of recorded investment income.
The primary purpose of sending a standard confirmation request to financial institutions with which the client has done business during the year is to:
Corroborate information regarding deposit and loan balances.
