Exam 4: Audit Responsibilities and Objectives

Formamould Inc.sells plastic moulds to a variety of companies.Some moulds are custom made and cost thousands of dollars.To help customers finance these purchases,Formamould uses a variety of methods,such as payment terms stretched over three years,delayed payment,and pay-as-you-produce models tailored to individual customer needs.The outstanding balance is included in current accounts receivable.The general balance-related audit objective affected by this activity is

For the most part,auditors treat each transaction cycle

List the components of the auditor's professional judgment framework.

Transaction cycles begin and end at

The decision to continue doing the audit of an existing client is

What in auditing is the application of relevant knowledge and experience,within the context provided by auditing and accounting standards and Rules of Professional Conduct,in reaching decisions where a choice must be made between alternative possible courses of action?

CAS 200 explains that the purpose of the financial statement audit is to express an opinion on the financial statements.This opinion is an assessment of whether the financial statements are presented fairly using

Analytical procedures are those that

Gabori Company would like to pay less income tax this year.It decided that it could do this by understating its inventory values,increasing costs of goods sold.This was done by deliberately pricing the inventory at incorrect amounts,so that it would be shown at a lower value than it was really worth (for example,items worth five dollars each were shown at fifty cents each).Which management assertion has been violated?

What are the qualities of professional skepticism?

The auditor has considerable responsibility for notifying users whether the financial statements are fairly stated.This imposes upon the auditor a duty to

The controller who had been with Bianca Limited for six years was fired last month,allegedly for pocketing cash.Unfortunately,there was a fire in the accounting department the week before he was fired,which destroyed the accounting records,including the computer equipment and current backup disks.The only records available for the current year is a copy of the computer system that is a month old.There are also disks for the year-ends going back three years.These were at the president's home,the place where the company kept archival records. Required: Explain how this situation might affect the audit process.

The auditor gives an audit opinion on the fair presentation of the financial statements and associates his or her name with it when,on the basis of adequate evidence,the auditor concludes that the financial statements are unlikely to mislead

Professional skepticism during the financial statement audit requires an appropriate state of mind,being impartial and objective and continuing to be throughout the whole audit engagement.Which of the following illustrates an appropriate state of mind?

Outline the specific areas that auditors responsibilities are focused upon.

List and explain the assertions that are relevant to presentation and disclosures.

After the auditor has completed all the procedures,it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented.This is a highly subjective process that relies heavily on

The audit process has seven categories of audit phases: the first two categories of the audit process are?

Heavy Manufacturing Company is in the business of making steel plates,forming heavy metal slabs,and drilling and scoring metals.The company recently upgraded many of its forming machines.Five machines were purchased on four different invoices.Unfortunately,one of the invoices was recorded twice,resulting in five invoices being recorded.The general balance-related audit objective affected by this activity is

Heavy Manufacturing Company is in the business of making steel plates,forming heavy metal slabs,and drilling and scoring metals.The company recently upgraded many of its forming machines.Fortunately,it was able to sell its old equipment at a reasonable price.The effect was that sales for the quarter are substantially improved over the same period in the prior year.The general transaction-related audit objective affected by this activity is