ACC 491 Contemporary Auditing I Week 2 Textbook Exercises

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Week 3 Textbook Exercises1Week 2 Textbook ExercisesACC 491 Contemporary Auditing IDate:5-30(Assertions)In planning the audit of a client’s financial statements, an auditor identified the followingissues that need audit attention.1.The allowance for doubtful accounts isfairly presented in amount.Balance Audit Objective—Valuation and Allocation2.All accounts payable owed as of the balance sheet date are included in the financial statements.Balance Audit Objective—Completeness3.All purchase returns recorded in the general ledger are valid.Transaction Audit Objective—Occurrence4.There is a risk that purchases made in the last week of the month might be recorded in thefollowing period.Transaction Audit Objective—Completeness/Cutoff5.The client may have factored accounts receivable.Disclosure Audit Objective—Obligations, Rights, and Occurrence6.The client has used special-purpose entities to finance a building. Neither the building nor thedebt is included in the financial statements.Disclosure Audit Objective—Completeness7.A retail client values its inventory using the retail method of accounting.Balance Audit Objective—Valuation & Allocation8.A construction client uses the percentage of completion method for recognizing revenues.Transaction AuditObjective--Occurrence9.A client has a defined benefit pension plan and does not have competent employees to writefootnote disclosures.Disclosure Audit Objective—Classification & Understandability10.A client acquired a subsidiary company and paid a high amount of goodwill when the stockmarket, and resulting values, were at all-time highs.Balance Audit Objective—Valuation & Allocation11.A client financed the acquisition of assets using preferred stock that pays a 3 percent dividendand must be redeemed from the shareholders next year.Disclosure Audit Objective—Classification & UnderstandabilityRequiredIdentify the assertion for items 1 through 11 above.6-22(Audit evidence)During the course of an audit, the auditor examines a wide variety ofdocumentation. Listedbelow 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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