Errors

Question 1

Client bought property to be held for investment purposes. property value tripled and client reported FMV on F/S. Client uses GAAP.

Answer 1

Valuation and Allocation

GAAP says land held for investment should be shown at Historical cost

Question 2

Cash confirmation shows an outstanding loan was not recored

Answer 2

Completeness (Account Balances)

Failure to record a loan means that payables are Incomplete

Question 3

Auditor was unable to locate selected older assets. company disposed of them during the year

Answer 3

Existence

Assets on books and records that are retired - do not “Exist” anymore as of year end

Question 4

Current portion of Long term debt remained in Long Term liabilities

Answer 4

Understandability and classification

GAAP requires current portion to be in current liabilities

Question 5

Auditor found shipping documents without related sales invoices

Answer 5

Completeness (transactions and events)

Goods shipped may not be billed. (Sales are Incomplete)

Question 6

Items listed on ledger that are older are shown to be obsolete and worthless

Answer 6

Allocation and Valuation

Obsolete or worthless items should be written down to NRV or Written off

Question 7

Client purchase truck but did not obtain legal title

Answer 7

Rights and Obligations

If title did not transferred - owner technically doesn’t have ownership Rights

Question 8

mistake in amount posted to subledger

Answer 8

Accruacy