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Below Are 12 Audit Procedures

Question 116

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Below are 12 audit procedures.Classify each procedure according to the following seven types of audit evidence: physical examination, confirmation, documentation, observation, inquiry of the client, reperformance, and analytical procedure.

Premises:
Compare customer names and amounts on sales invoices with entries in the sales journal.
Count inventory items and record the amount in the audit working papers.
Examine a piece of equipment to make sure a recent purchase of equipment was actually received and is in operation
Watch client employees count inventory to determine whether company procedures are being followed.
Stand by the payroll time clock to determine whether any employee 'punches in' more than one time.
Review the total of repairs and maintenance for each month to determine whether any month's total was unusually large.
Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year.
Re-foot entries in the sales journal to determine whether they were correctly totalled by the client.
Obtain a written statement from the client's bank stating the client's year-end balance on deposit.
Obtain information about the client's internal controls by asking questions of client personnel.
Make a surprise count of petty cash to verify that the amount of the petty cash fund is intact.
Trace column totals from the cash disbursements journal to the general ledger.
Responses:
physical examination.
inquiry of the client.
documentation.
reperformance.
analytical procedure.
confirmation.
observation.

Correct Answer:

Compare customer names and amounts on sales invoices with entries in the sales journal.
Count inventory items and record the amount in the audit working papers.
Examine a piece of equipment to make sure a recent purchase of equipment was actually received and is in operation
Watch client employees count inventory to determine whether company procedures are being followed.
Stand by the payroll time clock to determine whether any employee 'punches in' more than one time.
Review the total of repairs and maintenance for each month to determine whether any month's total was unusually large.
Calculate the ratio of cost of goods sold to sales as a test of overall reasonableness of gross margin relative to the preceding year.
Re-foot entries in the sales journal to determine whether they were correctly totalled by the client.
Obtain a written statement from the client's bank stating the client's year-end balance on deposit.
Obtain information about the client's internal controls by asking questions of client personnel.
Make a surprise count of petty cash to verify that the amount of the petty cash fund is intact.
Trace column totals from the cash disbursements journal to the general ledger.
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