Auditing Chapter 6 Essay

1224 words - 5 pages

William Outlar
AC555
Homework 3

Chapter 6
6-19 A. Which of the following best describes the reason why an independent auditor reports on financial statements?
Ans. (2) Different interests may exist between the company preparing the statements and the persons using the statements.
B. An independent audit aids in the communication of economic data because the audit
Ans. (2) lends credibility to the financial statements.
C. The major reason an independent auditor gathers audit evidence is to
Ans. (1) form an opinion on the financial statements.

6-20 A. An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting errors and ...view middle of the document...

These claims are the same for every transaction cycle and account. General transaction-related audit objectives are really the same as management assertions, but they are modified a little to help the auditor decide which audit evidence is needed to justify the management assertions. Specific transaction-related audit objectives are determined by the auditor for each general transaction-related audit objective. This process is done for every transaction to help the auditor know what amount of evidence is needed for that cycle to satisfy the general transaction related audit objectives.
B. For each specific transaction related audit objective, identify the appropriate management assertions
1. Occurrence-a
2. Completeness-d
3. Accuracy-c,b
4. Classification-e
5. Cutoff-f
C. For each specific transaction related audit objective, identify the appropriate general transaction related audit objective.
6. Occurrence-a
7. Completeness-c
8. Accuracy-d
9. Posting and Summarization-b
10. Classification-e
11. Timing-f

Chapter 7
7-14 Your client, Harper Company, has a contractual commitment as a part of a bond indenture to maintain a current ratio of 2.0. If the ratio falls below that level on the balance sheet date, the entire bond becomes payable immediately. In the current year, the client’s financial statements show that the ratio has dropped from 2.6 to 2.05 over the past year. How should this situation affect your audit plan?
Ans. I would focus more attention on the company’s assets and liabilities. I would be looking to evaluate their ability to pay off the bond if it does fall below 2.0. Also, I would note the potential effects of this on the financial statements.

7-27 A. Which of the following types of documentary evidence should the auditor consider to be the most reliable?
Ans. (2) Confirmation of an account payable balance mailed by and returned directly to the auditor.
B. The most reliable type of audit evidence that an auditor can obtain is
Ans. (1) physical examination by the auditor.
C. Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence?
Ans. (4) Prenumbered sales invoices
D. Which of the following presumptions is correct about the reliability of audit evidence?
Ans. (1) Information obtained indirectly from outside sources is the most reliable audit evidence.

7-28 A. Which of the following is not a primary purpose of audit documentation?
Ans. (3) To support the financial statements.
B. During an audit engagement, pertinent data are compiled and included in the audit files. The audit files primarily are considered to be
Ans. (3) support for the auditors representations as to compliance with auditing standards.
C. Although the quantity, type, and content of audit documentation will vary with the circumstances, audit documentation generally will include the
Ans. ...

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