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 ObjectiveValuation and Allocation

2.
All accounts payable owed as of the balance sheet date are included in the financial statements.
Balance Audit ObjectiveCompleteness

3.
All purchase returns recorded in the general ledger are valid.
Transaction Audit ObjectiveOccurrence

4.
There is a risk that purchases made in the last week of the month might be recorded in the
following period.

Transaction Audit ObjectiveCompleteness/Cutoff

5.
The client may have factored accounts receivable.
Disclosure Audit ObjectiveObligations, 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 ObjectiveCompleteness

7.
A retail client values its inventory using the retail method of accounting.
Balance Audit ObjectiveValuation & 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 ObjectiveClassification & 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 ObjectiveValuation & 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 ObjectiveClassification & 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

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