An independent auditor is currently attempting to gain evidence about a reporting company’s accounts receivable. According to the records, the company is owed $760 by Arnold Alexander Wilson. Which of the following is true?

Confirmation is most likely to be a relevant form of evidence with regard to assertions about accounts receivable when the auditor has concerns about the receivables’:

Evidence and Assertions Continued Below are audit procedures – five that are associated with the sales cycle and five that are associated with the purchases cycle. For each procedure, identify: The management assertion that is being tested The type of evidence gathered. Procedure Evidence Assertion Tour the client’s production facilities to verify the presence of manufacturing equipment listed as PP&E. Compare the ratio of repair and maintenance expense to total plant assets for the current year to the prior two years and investigate unusual differences to determine if the client has inappropriately capitalized expenses instead of expensing them. Watch a clerk in the payables department to ensure that, prior to generating a payment, the clerk matches the invoice to the shipping record to ensure the shipment has been received. Review the board of directors’ meeting minutes to identify all related parties to ensure that no related-party sales have been recorded as regular sales. Select a sample of payments made after year-end and review supporting documentation to ensure all liabilities have been properly recorded and/or accrued as of year-end.

In auditing accounts payable, an auditor’s procedures most likely will focus primarily on management’s assertion of

Which of the following represents an inappropriate segregation of duties?

An auditor concludes that a client’s illegal act, which has a material effect on the financial statements, has not been properly accounted for or disclosed. Depending on the pervasiveness of the effect on the financial statements, the auditor should express either a(an)

Subsequent Events Milne Manufacturing’s fiscal year end was 12/31/X5. The auditors finished all test work on 3/15/X6, and the audit report and financial statements were publicly distributed on 3/28/X6. Consider each of the following material events and determine what action, if any, the auditor should take. Select the best action for each of the situations below. Each answer will be used only once.

Which of the following things must be considered when putting new stock into inventory?

Evidence and Assertions Below are audit procedures – five that are associated with the sales cycle and five that are associated with the purchases cycle. For each procedure, identify: The management assertion that is being tested The type of evidence gathered. Procedure Evidence Assertion Trace the monthly total recorded in the purchases journal to the general ledger to ensure all purchases were recorded. Send an email to the controller asking if any of the existing accounts receivable have been pledged as collateral. Send a letter to a sample of customers with outstanding accounts receivable asking them to verify that they have an outstanding balance as of 12/31. Using a sample of shipping records near year-end, compare the invoice date to the shipping date to ensure revenue was recorded in the proper period. Using a sample of sales invoices, compare the items sold to the associated shipping record to ensure the correct items and price were billed.

In order to form an opinion on the financial statements, the auditor should consider whether: