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11 Cards in this Set

  • Front
  • Back

What part should the auditors play in planning the physical inventory

Review the client's planning of the physical inventory and make suggestions on improvement

Describe the procedures performed by auditors during their observation of physical inventory

Inspect the inventory to determine its existence and condition, and make test counts. Observe compliance with management's instructions for the count. Obtain audit evidence about the reliability of the count procedures.

Why do the auditor's document the inventory test counts in their working paper

To test the accuracy of the final inventory listings

Why are the auditors concerned with detecting damaged and obsolete goods

The record cost of these goods may be significantly greater than their net realizable value

How do the auditors test for damaged goods in the client's inventory

By inquiry of client personnel and observation during the client physical inventory count

How do the auditors test for obsolete goods in the client's inventory

Review perpetual inventory records. Analytical procedures, such as calculations of ratios. Inquiry of client personel

Describe two reasons why the confirmation of accounts payable is not a generally accepted auditing procedure

Confirmation is a test of existence not completeness which is the primary objective. The clients possess externally created evidence that substantiate the accounts payable.

Describe the audit circumstances in which the auditors are likely to decide to confirm accounts payable

When the extent of the evidence available in the clients possession is not sufficient

Describe the types of accounts payable the auditors are likely to select for confirmation

Vendors whom substantial purchases have been made. Even vendors with zero balances

Describe the reason that the auditors are concerned with the completeness of accounts payable

The possibility of understatement or omission of liabilities. Understatement of liabilities will exaggerate financial strength.

Describe three ways in which auditors establish completeness of accounts payable

Confirmation of accounts payable. Reconciliation of liabilities with vendors statements. Search for unrecorded accounts payable