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Tests of account balances are intended to obtain audit evide

Tests of account balances are intended to obtain audit evidence about
the fairness of the inventory accounts or, alternatively, identify material misstatements
in the amounts presented. Audit procedures can only be selected after the auditor
determines specific audit objectives related to management assertions.

Management Assertions
1. Existence or occurrence
2. Completeness
3. Rights and obligations
4. Valuation or allocation
5. Presentation and disclosure

Required:

For each audit procedure below, identify the related management assertion(s) that
the audit procedure tests and explain the audit objective of the procedure.
(a) Trace totals of inventory files to the general ledger, including proper classification
as raw materials, WIP, or finished goods.
(b)Test additions to inventory by selecting a sample of recorded purchases from the
inventory records and examining supporting documents.
(c) Review consignment contracts and scan inventory records for inclusion of
amounts for any consigned items not owned.
(d)Reperform calculations supporting decisions about write-downs or write-offs of
inventory and trace any adjustment amounts to the inventory records.
(e) Using computer-assisted auditing techniques reperform calculations testing mathematical
accuracy, including totals extensions of price and quantity and unit or
batch aggregations; recalculation is based on appropriate application of the client
costing method (FIFO, LIFO, weighted average, specific identification, etc.).

Solution Preview

(a) Trace totals of inventory files to the general ledger, including proper classification
as raw materials, WIP, or finished goods. - Valuation.
Objective: To determine if the correct totals are on the company's ledgers and if the correct totals flow onto the company's balance sheet.

(b)Test additions to inventory by selecting a sample of recorded purchases from the
inventory records and examining supporting ...

Solution Summary

Tests of account balances are intended to obtain audit evidence about
the fairness of the inventory accounts or, alternatively, identify material misstatements
in the amounts presented. Audit procedures can only be selected after the auditor
determines specific audit objectives related to management assertions.

Management Assertions
1. Existence or occurrence
2. Completeness
3. Rights and obligations
4. Valuation or allocation
5. Presentation and disclosure

Required:

For each audit procedure below, identify the related management assertion(s) that
the audit procedure tests and explain the audit objective of the procedure.
(a) Trace totals of inventory files to the general ledger, including proper classification
as raw materials, WIP, or finished goods.
(b)Test additions to inventory by selecting a sample of recorded purchases from the
inventory records and examining supporting documents.
(c) Review consignment contracts and scan inventory records for inclusion of
amounts for any consigned items not owned.
(d)Reperform calculations supporting decisions about write-downs or write-offs of
inventory and trace any adjustment amounts to the inventory records.
(e) Using computer-assisted auditing techniques reperform calculations testing mathematical
accuracy, including totals extensions of price and quantity and unit or
batch aggregations; recalculation is based on appropriate application of the client
costing method (FIFO, LIFO, weighted average, specific identification, etc.).

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