Exam 11: Substantive Testing, Caat and Audit Programmes

You are an audit senior of Auditron & Co and are currently conducting the audit of Winterking for the year ended 30 June 2019. Materiality has been set at $100,000, and you are carrying out the detailed substantive testing on the year-end Payables Ledger balances. Understatement of the Trade Payables balances was identified as a significant audit risk during the planning process. This is an extract from the list of supplier statements as at 30 June 2019 held by the company and corresponding Payables Ledger balances at the same date along with some commentary on the noted differences: Screwport The difference in the balance is due to an invoice which is under dispute due to faulty goods which were returned on 29 June 2019. Washpot The difference in the balance is due to the supplier statement showing an invoice dated 28 June 2019 for $140,000 which was not recorded in the financial statements until after the year end. The payables clerk has advised the audit team that the invoice was not received until 2 July 2019. Which of the following audit procedures should be performed in relation to the balance with Washpot to determine if the payables balance is understated?

Which of the following is an objective of the auditor in obtaining written representations from management?

You are an audit senior of Auditron & Co and are currently conducting the audit of Winterking for the year ended 30 June 2019. Materiality has been set at $100,000, and you are carrying out the detailed substantive testing on the year-end Payables Ledger balances. Understatement of the Trade Payables balances was identified as a significant audit risk during the planning process. This is an extract from the list of supplier statements as at 30 June 2019 held by the company and corresponding Payables Ledger balances at the same date along with some commentary on the noted differences: Screwport The difference in the balance is due to an invoice which is under dispute due to faulty goods which were returned on 29 June 2019. Washpot The difference in the balance is due to the supplier statement showing an invoice dated 28 June 2019 for $140,000 which was not recorded in the financial statements until after the year end. The payables clerk has advised the audit team that the invoice was not received until 2 July 2019. The audit manager has asked you to review the full list of trade payables and select balances on which supplier statement reconciliations will be performed. Which of the following items should you select for testing? (1) Suppliers with material balances at the year end (2) Suppliers which have a high volume of business with Winterking (3) Major suppliers with nil balances at the year end (4) Major suppliers where the statement agrees to the ledger

Which of the following items are likely to be included in a management representation letter to the auditor? 1) That management have assessed the risk of fraud. 2) That management are financially qualified. 3) That all related parties have been identified. 4) That management have complied with all laws and regulations.

The financial statements include various assertions made by management which underpin the figures. Which of the following statements is correct relating to assertions?

Which of the following are perceived benefits of using audit software? 1) Quicker auditing - due to the ability to use CAATs to analyse data and improve planning. 2) Auditing the computer system rather than auditing around the computer 3) More testing can be done on bigger volumes of data. 4) Audit costs can be reduced.

You are an audit senior of Auditron & Co and are currently conducting the audit of Winterking for the year ended 30 June 2019. Materiality has been set at $100,000, and you are carrying out the detailed substantive testing on the year-end Payables Ledger balances. Understatement of the Trade Payables balances was identified as a significant audit risk during the planning process. This is an extract from the list of supplier statements as at 30 June 2019 held by the company and corresponding Payables Ledger balances at the same date along with some commentary on the noted differences: Screwport The difference in the balance is due to an invoice which is under dispute due to faulty goods which were returned on 29 June 2019. Washpot The difference in the balance is due to the supplier statement showing an invoice dated 28 June 2019 for $140,000 which was not recorded in the financial statements until after the year end. The payables clerk has advised the audit team that the invoice was not received until 2 July 2019. Which of the following audit procedures should be carried out to confirm the balance owing to Screwport? (1) Review post year-end credit notes for evidence of acceptance of return (2) Inspect pre year-end goods returned note in respect of the items sent back to the supplier (3) Inspect post year-end cash book for evidence that the amount has been settled

When ABC Co. receives a purchase invoice it is checked by the accounts clerk for accuracy then authorised by the line manager who signs it to verify that it has been authorised. How can the auditor test the control over authorisation of invoices is being carried out?