Exam 16: Auditing Operations and Completing the Audit

The auditors' primary means of obtaining corroboration of management's information concerning litigation is a:

A common audit procedure in the audit of payroll transactions involves tracing selected items from the payroll journal to employee time cards that have been approved by supervisory personnel. This procedure is designed to provide evidence in support of the audit proposition that:

The review of audit working papers by the audit partner is normally completed:

In the course of the audit of financial statements for the purpose of expressing an opinion thereon, the auditors will normally prepare a schedule of unadjusted differences for which the auditors did not propose adjustments when they were identified. What is the primary purpose served by this schedule?

The audit of which of the following balance sheet accounts does not normally result in verification of an income statement account?

Which of the following is not a procedure that auditors typically perform to search for significant events during the period after year-end but prior to the audit report date?

Subsequent events that provide additional evidence as to conditions that existed at the balance sheet date may result in adjusting journal entries.

The Miscellaneous Revenue account should only be analyzed if it is material in amount.

During the course of the year 2 audit of Smithsone Company, the auditor discovered the following situations that may or may not require an adjusting journal entry. Each audit finding is independent of any of the other findings. Select the account or accounts that would comprise the adjusting journal entry, if required, to correct the audit finding. Accounts may be used once, more than once, or not at all. Selection list for amount Cash Accrued liabilities Interest expense Accounts receivable Common stock Other income Other current assets Revenues Accumulated depreciation Property and equipment Allowance for doubttul accounts Disclosure but no entry required Accounts payable Operating expenses No entry or disclosure required

Auditors are concerned with the existence of loss contingencies that may affect the client's financial statements. One way that the auditors obtain evidence about existing loss contingencies is through the lawyer's letter. a. Describe the information that the auditors wish to obtain about the litigation being handled by a lawyer. b. Describe three other procedures that are used by auditors to discover existing loss contingencies.

Auditors must be concerned with events that occur subsequent to the balance sheet date, because the events may need to be reflected in the financial statements. a. Describe the two general types of subsequent events. b. What is the auditors' responsibility with respect to detecting subsequent events? c. List three audit procedures that are used by the auditors to search for subsequent events.

In evaluating whether there is a sufficiently low probability of material misstatement in the financial statements, the auditors accumulate:

Which of the following procedures would an auditor most likely perform while evaluating audit findings at the conclusion of an audit?

Management estimates the company's allowance for doubtful accounts as $200,000, and the auditors develop an estimate that suggests that the amount should be between $230,000 and $250,000. The likely misstatement in this situation is:

Authorization of which of the following is least likely to be found during a review of the minutes of the board of directors?

Which of the following audit procedures is aimed at determining whether every name on the company payroll is an employee actually on the job?

Internal control over payroll is enhanced when the personnel department distributes payroll checks.

Which of the following statements ordinarily is not included among the written client representations made by the chief executive officer and the chief financial officer?

A client's previous two years of financial statements understated estimated warranty payable by $30,000 and $50,000 respectively, both immaterial amounts. This year, the auditors estimate that the accrual is understated by an additional $60,000. In this year's audit, $100,000 represents a material amount. Assuming that the entire understatement is to be recorded based on SEC SAB 108, the decrease in this year's income due to these understatements is:

To minimize the opportunities for fraud, unclaimed cash payroll should be: