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External Auditing

Auditing Multiple Choice

1. Observation of inventories is a required audit procedure whenever a. inventories are material. b. inventories are material and it is practicable and reasonable. c. it is practicable and reasonable. d. the auditor considers it to be necessary. e. inventories are material and the auditor considers it to be necessary.

Define lapping and give an example.

Can anyone help with the following study guide? Thank you. 1. Define lapping and give an example. 2. What is a substantive test of transactions? How would it be applied to accounts receivable an inventory? 3. What is the difference between a positive and negative confirmation? When are they used and why? 4. List the

Merry-Go-Round and Ernst and Young Lawsuit

Merry-Go-Round (MGR), a clothing retailer located primarily in shopping malls, was founded in 1968. By the early 1990's, the company had gone public, and had expanded to approximately 1,500 stores, 15,000 employees, and $1 billion in annual sales. The company's locations in malls targeted the youth and teen market. The company w

Rand & Brink Auditing Procedures: evaluate company ideas

On October 21, Rand & Brink, a CPA firm, was retained by Suncraft Appliance Corporation to perform an audit for the year ended December 31, A month later, James Minor, president of the corporation, invited the CPA firm's partners, George Rand and Alice Brink, to attend a meeting of all officers of the corporation. Mr. Minor op

Auditing procedures: 15 MCQ

1. A company has a large amount of goods returned during the last month of the fiscal year and the first month of the new fiscal year. Returns are sometimes done for exchanges. The returns were recorded when credit memos were issued usually between 6 to 8 weeks after weeks from the return of the goods. The procedure that would

Auditing a Publicly Traded Company: share-based payment reporting, SPE

Consider the following scenario: As a Staff I assigned to the audit of a publicly traded company, your senior has asked you to evaluate both share-based payment reporting and special purpose entities (SPE) reporting for the company. Research share-based payment reporting and SPE reporting, then write an executive memo that

Modern Auditing - Risk of Material Misstatement

Your client, a manufacturer of computer components, has experienced slowing demand for its product. Recently, it cut back from three shifts a day to two shifts a day, and the company has eliminated the backlog of orders that existed in prior years by providing financing to customers. Newspaper reports indicate that competition h

Auditing: CSSC Unqualified Audit Report

CSSC wants to be ensured that the audit report for year-end 2005 is a standard unqualified audit report. Management has requested that you create a presentation about how to obtain an unqualified audit report. Include the following details: - What are the circumstances that could prevent the external auditors from providing a

Auditing: COSO Internal Control-Integrated Framework

You have learned that the internal control framework for most U.S. companies is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control-Integrated Framework issued in 1992. Complete the following: Identify the Treadway Commission discussing its origin, history, and purpose. List the

Auditing CSSC: design an effective internal control system

To properly assess the internal controls in place at CSSC, you have found that there are three major objectives that an entity should follow in designing an effective internal control system: - reliability of financial reporting - efficiency and effectiveness of operations - compliance with laws and regulations Explain w

20 Auditing Multiple Choice Questions

I have a multiple choice practice test/study guide for my auditing class below. Please help with the answers for this study guide. 1. The definition of auditing states that the auditor A. objectively obtains evidence B. is independent C. must evaluate internal control D. none of the above

Audit Report: Example Problem

What information is provided in the auditors' report? Does the audit report offer any guarantees? Explain. What do you think that the general public believes the auditors are providing?

Auditing

17-27 (Substantive tests for stockholders' equity balances) Jones, CPA, the continuing auditor of Sussex, Inc., is beginning the audit of the common stock and treasury stock accounts. Jones has decided to design substantive tests with control risk at the maximum level. Sussex has no par, no stated value common stock, and acts a

Auditing

REQUIRED: (1).Comment on the following: "Auditors must decide, based on cost considerations, whether to test the design effectiveness or operating effectiveness of controls." (2).Comment on the following: "All controls should be tested either prior to or on the 'as of ' date." (3).If an adverse internal control report is

Auditing

REQUIRED: (1) Discuss management's four overall responsibilities with respect to internal control over financial reporting that arise from the SEC's implementation of the Sarbanes-Oxley Act of 2002. (2) Discuss what is meant by a "walkthrough." Must walkthroughs be performed during audits of internal control over financial r

Sequence of activities in cash collections

REQUIRED: 1.Discuss the basic sequence of activities in cash collections. 2.Explain why a list of cash remittances should be made and sent to accounting departments, rather than to the accountants directly, so they can enter the credits to customers' accounts accurately.

Auditing - Western Trading Company

Western Trading Company is a sole proprietorship engaged in the grain brokerage business. On December 31, 2006, the entire grain inventory of the company was stored in outside bonded warehouses. The company's procedure of pricing inventories in these warehouses includes comparing the actual cost of each commodity in inventory wi

Positive and negative external confirmation requests

A) Explain what are positive and negative external confirmation requests? (b) You are assigned to audit the trade receivable balance of a trading company. The company accountant has provided you the trade receivable balance report as at 31st March 2002. What information from this report would you require to prepare positive c

Auditing the sales and collection cycle

Please help me so I can complete the following: You are auditing the sales and collection cycle for the United Regional Hospital, a small not-for-profit hospital. The hospital has a reputation for excellent medical services and weak record keeping. The medical people have a tradition of doing all aspects of their job correctl

Purchase Commitments and Unrecorded Liabilities

How can a purchasing manager use his/her position to defraud the company? What can be done to prevent it? Where could an auditor look to find evidence of losses on purchase commitments and unrecorded liabilities to vendors?

Audit Sampling Applied to Tests of Controls

7. Warren Boyd, a beginning staff auditor, believes that audit sampling applies not only to tests of controls but may be used with all auditing procedures relating to tests of controls. Is he correct? Explain 9. Explain a situation where the concepts of audit sampling do not apply to tests of controls 10. Explain several

Auditing - Assessing control risk

An auditor is required to obtain a sufficient understanding of each of the components of an entity's system of internal control to plan the audit of the entity's financial statements and to assess control risk for the assertions embodied in the account balance, transaction class, and disclosure components of the financial statem