ACC 491 Contemporary Auditing I Week 2 Textbook Exercises
Exercises focusing on contemporary auditing practices.
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Week 3 Textbook Exercises 1
Week 2 Textbook Exercises
ACC 491 Contemporary Auditing I
Date:
5-30 (Assertions) In planning the audit of a client’s financial statements, an auditor identified the following
issues that need audit attention.
1. The allowance for doubtful accounts is fairly presented in amount.
Balance Audit Objective—Valuation and Allocation
2. All accounts payable owed as of the balance sheet date are included in the financial statements.
Balance Audit Objective—Completeness
3. All purchase returns recorded in the general ledger are valid.
Transaction Audit Objective—Occurrence
4. There is a risk that purchases made in the last week of the month might be recorded in the
following period.
Transaction Audit Objective—Completeness/Cutoff
5. The client may have factored accounts receivable.
Disclosure Audit Objective—Obligations, Rights, and Occurrence
6. The client has used special-purpose entities to finance a building. Neither the building nor the
debt is included in the financial statements.
Disclosure Audit Objective—Completeness
7. A retail client values its inventory using the retail method of accounting.
Balance Audit Objective—Valuation & Allocation
8. A construction client uses the percentage of completion method for recognizing revenues.
Transaction Audit Objective--Occurrence
9. A client has a defined benefit pension plan and does not have competent employees to write
footnote disclosures.
Disclosure Audit Objective—Classification & Understandability
10. A client acquired a subsidiary company and paid a high amount of goodwill when the stock
market, and resulting values, were at all-time highs.
Balance Audit Objective—Valuation & Allocation
11. A client financed the acquisition of assets using preferred stock that pays a 3 percent dividend
and must be redeemed from the shareholders next year.
Disclosure Audit Objective—Classification & Understandability
Required
Identify the assertion for items 1 through 11 above.
6-22 (Audit evidence) During the course of an audit, the auditor examines a wide variety of documentation. Listed
below are some forms of documentary evidence and the sources from which they are obtained.
1. Bank statement sent directly to the auditor by the bank.
Week 2 Textbook Exercises
ACC 491 Contemporary Auditing I
Date:
5-30 (Assertions) In planning the audit of a client’s financial statements, an auditor identified the following
issues that need audit attention.
1. The allowance for doubtful accounts is fairly presented in amount.
Balance Audit Objective—Valuation and Allocation
2. All accounts payable owed as of the balance sheet date are included in the financial statements.
Balance Audit Objective—Completeness
3. All purchase returns recorded in the general ledger are valid.
Transaction Audit Objective—Occurrence
4. There is a risk that purchases made in the last week of the month might be recorded in the
following period.
Transaction Audit Objective—Completeness/Cutoff
5. The client may have factored accounts receivable.
Disclosure Audit Objective—Obligations, Rights, and Occurrence
6. The client has used special-purpose entities to finance a building. Neither the building nor the
debt is included in the financial statements.
Disclosure Audit Objective—Completeness
7. A retail client values its inventory using the retail method of accounting.
Balance Audit Objective—Valuation & Allocation
8. A construction client uses the percentage of completion method for recognizing revenues.
Transaction Audit Objective--Occurrence
9. A client has a defined benefit pension plan and does not have competent employees to write
footnote disclosures.
Disclosure Audit Objective—Classification & Understandability
10. A client acquired a subsidiary company and paid a high amount of goodwill when the stock
market, and resulting values, were at all-time highs.
Balance Audit Objective—Valuation & Allocation
11. A client financed the acquisition of assets using preferred stock that pays a 3 percent dividend
and must be redeemed from the shareholders next year.
Disclosure Audit Objective—Classification & Understandability
Required
Identify the assertion for items 1 through 11 above.
6-22 (Audit evidence) During the course of an audit, the auditor examines a wide variety of documentation. Listed
below are some forms of documentary evidence and the sources from which they are obtained.
1. Bank statement sent directly to the auditor by the bank.
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Document Details
University
Grand Canyon University
Subject
Accounting