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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 |
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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. |
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Why do the auditor's document the inventory test counts in their working paper |
To test the accuracy of the final inventory listings |
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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 |
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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 |
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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 |
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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. |
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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 |
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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 |
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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. |
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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 |