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Chapter 13
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
LEARNING OBJECTIVES
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
LEARNING OBJECTIVES CONT'D
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
LEARNING OBJECTIVES CONT'D
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.484
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.485
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.485–486
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.486
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.486 CONT'D
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.1
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.488–489
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.489
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.2
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.3
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.492
Substantive testing of stocks and related production
costs address:
• existence;
• condition;
• ownership;
• cut-off;
• production costs (genuine accurate and complete);
• production costs (properly allocated to stocks on
hand, and amount attributed to stocks is genuine,
accurate and complete)
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.493
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.494
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.4
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.4 CONT'D
Use
Use with The withProcess:
Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.4 CONT'D
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.496
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.5
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.497–499
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.497–499 CONT'D
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.497–499 CONT'D
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.497–499 CONT'D
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.499
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.499–500
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.500
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.501–502
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.501–502 CONT'D
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.502
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.6
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.511
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.511 CONT'D
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with The
The withProcess:
Audit
Audit The AuditPrinciples,
Process: Process 4Practice
Principles, th Edition
Practice and
and Cases
Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.513–514
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.513–514 CONT'D
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.513–514 CONT'D
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.517
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.517–518
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.518
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.518 CONT'D
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.518 CONT'D
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.518–519
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – p.519–520
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
KEY POINTS – pp.520–521
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.7
Situation 1.
Company A is a glass manufacturer and requires
high quality sand from Australia for its production
of special precision glass products. At the year-
end, sand is on board a ship in the middle of the
Indian Ocean. What audit steps would you take
to ensure related liabilities have been properly
recorded and reflected in the financial
statements?
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.7 CONT'D
Situation 2.
The audit programme for purchases and trade
creditors of company B includes the following:
‘Examine the company’s reconciliations between
creditors’ statements and purchase ledger
balances.’ You discover that company B has not
made such reconciliations and on selecting
creditors’ statements for comparison with purchase
ledger balances you find many material differences
between the two. Suggest further audit steps.
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.7 CONT'D
Situation 3.
You are investigating debit balances in the
creditors’ balances of company C. What audit
steps would you take to ensure the debit
balances are valid?
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.7 CONT'D
Situation 4.
Company D has listed unmatched GRNs and
goods returned forms (GRFs) at the year-end
date, valued them and included the amounts in
purchases accruals. What steps would you take
to satisfy yourself that the accruals are
acceptable?
Use
Use with The withProcess:
Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
ACTIVITY 13.7 CONT'D
Situation 5.
As part of your audit work you have reviewed the
forecast accounts to 31 December 2007 prepared
by company E six months prior to that year-end
date. You note that trade creditors in the forecast
accounts are about 25% higher than those shown
in the draft financial statements at 31 December.
Describe the audit tests you would make to satisfy
yourself that the trade creditors in the draft
financial statements are acceptable.
Use
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Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
CHAPTER SUMMARY
Use
Use with The withProcess:
Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
CHAPTER SUMMARY CONT'D
Use
Use with The withProcess:
Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning
FURTHER READING
Use
Use with The withProcess:
Audit The AuditPrinciples,
Process 4Practice
th Edition
and Cases
By Iain Gray
Third Edition & Gray
by Iain Stuart&Manson ISBN 9781844806782
Stuart Manson ISBN 1-86152-946-5
© 2005
2008 Thomson
Cengage Learning