Question 1

In deciding to implement analytical procedures, what are some factors the auditor will consider in determining a tolerable difference between the expectation and the recorded amount?

Accepted Answer

The answer of In deciding to implement analytical procedures, what...

Question 2

Discuss the reliability of the types of audit evidence and identify the level of reliability for each type of evidence.

Accepted Answer

The answer of Discuss the reliability of the types of...

Question 3

When using analytical procedures, the auditor first needs to develop an expectation with which to compare recorded results. What is meant by "precision of the expectation," and what factors affect the precision of analytical procedures?

Accepted Answer

The answer of When using analytical procedures, the auditor first...

Question 4

Stan is auditing First Financial Services and would like to use financial ratios to test the ability of First Financial Services to meet its current obligations. Identify two ratios that would help Stan in this task. Indicate how each ratio is calculated and what a high ratio would signify to Stan.

Accepted Answer

The answer of Stan is auditing First Financial Services and...

Question 5

For each of the following specific audit procedures, indicate the type of audit evidence it is gathering: (1)inspection of records or documents, (2)inspection of tangible assets, (3)observation, (4)inquiry, (5)confirmation, (6)recalculation, (7)reperformance, (8)analytical procedures, and (9)scanning. The audit evidences can be used more than once.
a. Discussing the recording of sales discounts in the fourth quarter with the accounts receivable manager.
b. Examining sales invoices for supporting customer order and shipping documents.
c. Reviewing the accounts payable subsidiary ledger for debit balances or interest-bearing payables.
d. Sending a written request to the entity's bank requesting the cash balances in the entity's accounts and any other liability balances that the entity owes the bank.
e. Comparing the current-year accounts receivable turnover with the accounts receivable turnover for the industry.
f. Examining a new piece of equipment to ensure that a major acquisition was received and is operational.
g. Watching the entity's accounting personnel while they prelist cash receipts.
h. Footing the entity's bank reconciliation and tracing the balance per the books to the general ledger.
i. Recomputing sales price and extensions on sales invoices.
j. For a sample of sales transactions recorded in the sales journal, tracing the sales invoices back to customer orders and shipping documents.

Accepted Answer

The answer of For each of the following specific audit...

Question 6

Who is responsible for the financial statements? What does the term "assertions" mean? Identify the assertion categories and the specific assertions for each category.

Accepted Answer

The answer of Who is responsible for the financial statements?...

Question 7

Name the three types of analytical procedures and provide a definition and example for each.

Accepted Answer

The answer of Name the three types of analytical procedures...

Quiz 5: Evidence and Documentation