Exam 9: Substantive Procedures and the Financial Statement Audit

You are assigned to audit accounts payable for a manufacturing client. As part of the planning, your manager sets a tolerable misstatement amount of+/- $125,000. Your review of unpaid invoices indicates an understatement error of $25,253 from a sample of $675,467. The population value of A/P is $5,241,687 at October 31st. The lower amount of the tolerable misstatement assuming the client booked an adjusting entry for the known errors (rounded) is:

Comparing the current year balance to the prior year's balance is an example of:

Allmark, the client, is a small manufacturing company currently in need of cash in order to stay in business. Loan payments exceeding its cash on hand are due in 60 days and if Allmark defaults, its bank says it will foreclose on the assets used as collateral. Allmark's only recourse then would be to file bankruptcy. One solution is to seek outside financing from vendors eager to keep Allmark in business, although the availability of financing will not be known until the next fiscal year. The auditor should:

An audit efficiency occurs when:

An example of a substantive analytical test for a hotel would be: