Auditing Questions (11-15)

11. When auditing inventories, an auditor would least likely verify that a. All inventory owned by the client is on hand at the time of the count. b. The client has used proper inventory pricing. c. The financial statement presentation of inventories is appropriate. d. Damaged goods and obsolete items have been properly accounted for. 12. A client maintains perpetual inventory records in quantities and in dollars. If the assessed level of control risk is high, an auditor would probably a. Apply gross profit tests to ascertain the reasonableness of the physical counts. b. Increase the extent of tests of controls relevant to the inventory cycle. c. Request the client to schedu... click for more

Auditing Questions (16-21)

16. Which of the following is ordinarily performed last in the audit examination? a. Securing a signed engagement letter from the client. b. Performing tests of controls. c. Performing a review for subsequent events. d. Obtaining a signed management representation letter. 17. Hall accepted an engagement to audit the year 1 financial statements of XYZ Company. XYZ completed the preparation of the year 1 financial statements on February 13, year 2, and Hall began the fieldwork on February 17, year 2. Hall completed the fieldwork on March 24, year 2, and completed the report on March 28, year 2. The management representation letter normally would be dated a. February 13, year 2. ... click for more

Auditing: revenue recognition procedures and policies

You have been recently hired as a new auditor for CM Fancy, a major manufacture of gift boxes. The company has been in operation for the past 5 years and has had a good degree of success. The company’s primarily sales channel has been through distributors using a dedicated sales force. Now the company has decided to go public through an IPO and plans to open a direct sale channels to the consumer via internet sales. While the company has had the same auditors (Castillo Miranda) since its inception, the CEO Jackie Gleason and the CFO Art Carney have decided that they would like your firm to audit their revenue recognition policies and to provide a memo the company to determine if the actual ... click for more

Auditing: Memo about recording a loss contingency

Your audit firm is auditing your client Jo-Jo Jolly Products. The company is a small regional manufacturing firm located in Rye, New York. The company manufactures and sells crayons and pencils directly to retail stores. Your firm is auditing the financial statements of this company as of the year ended December 31, 2006. During the audit your senior auditor has brought to your attention that the company is a defendant in legal case with one of the company’s major suppliers. Your firm has received a letter from the Company’s independent attorney, which is under retainer for this legal case, and has performed legal services for the company in the past. The facts are as follows: ·... click for more

Related Party Transactions: What disclosures are required in the financial statements

Most business transactions result from “arm’s length’ dealing. When parties to a transaction are related, the objectivity expected in unrelated bargaining may be lost. Any loss of objectivity may require reporting in the financial statements for users to be able to properly evaluate the company’s financial condition and results of operations. Consequently, material related party transactions must be disclosed. SFAS 57, Related Party Disclosures, identifies the requirements. Required: What information should be disclosed?