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Chapter 12 Ans
Chapter 12 Ans
AUDIT PROCEDURES
I.
Review Questions
1.
2.
3.
4.
12-2
5.
6.
Confirmations are usually considered more reliable because they are from
outside parties, while inquiries are made of client personnel.
7.
When equivalent procedures are available to satisfy the need for evidence, an
auditor may consider cost in selecting among the alternatives.
8.
c
d
3.
4.
c
a
5.
6.
c
c
7.
8.
a
d
9.
Existence. Obtain evidence that the securities are bona fide and held by
Wesson or by a responsible custodian.
Occurrence. Obtain evidence that the loan transaction and securities
purchase transactions actually took place during the year under audit.
Completeness. Obtain evidence that all the securities purchase transactions
were recorded.
Rights. Obtain evidence that the securities are owned by Wesson.
Obligation. Obtain evidence that P500,000 is the amount actually owed on
the loan.
Valuation. Obtain evidence of the cost and market value of the securities
held at December 31. Decide whether any writedowns to market are
required by GAAP.
Measurement.
Presentation and Disclosure. Obtain evidence of the committed nature of
the assets, which should mean they should be in a non-current classification
like the loan. Obtain evidence that restrictions on the use of the assets is
disclosed fully and agrees with the loan documents.
Audit Procedures
12-3
2.
3.
Confirmation by letter
* obtaining accounts receivable confirmations
* obtaining clients lawyers letter
4.
5.
Vouching
* find brokers invoices and cancelled checks showing agreement with
record amounts for securities investments
6.
Tracing
* select a sample of shipping documents and trace them to sales invoices,
sales journal recording and posting to general ledger
7.
Scanning
* scan expense accounts for credit entries
* scan payroll check lists for unusually large checks
8.
Case 3. a.
b.
2.
12-4
Case 4. 1.
2.
3.
4.
5.
Case 5. a.
b.
c.
d.
e.
Audit Procedures
12-5
Case 6. a.
b.
Case 7.
1.
2.
3.
4.
5.
6.
7.
f
l
h
e
p
m
d
8.
9.
10.
11.
12.
13.
14.
n
k
c
a
g
b
j
Case 8.
1.
2.
3.
4.
5.
6.
7.
8.
observation
inspection (analytical procedures)
inspection (examination of documents)
inspection (examination of documents)
inquiry
inspection (mechanical accuracy tests)
inspection (examination of documents)
confirmation