ACC 406 Chapter 6 || with Complete Solution.
indicate general objective(s) for each audit procedure: observe the clients physical inventory
correct answers general objective in performing substantive procedures on an asset account:
existence of assets
indicate general objective(s) for each audit procedure: locate on the clients premises a sample of
equipment items listed in the subsidiary plant and equipment ledger correct answers general
objective in performing substantive procedures on an asset account: existence because it goes
from ledger to physical evidence
indicate general objective(s) for each audit procedure: obtain a listing of inventory and reconcile
the total to the general ledger correct answers general objective in performing substantive
procedures on an asset account: valuation because you are crunching the numbers by reconciling
indicate general objective(s) for each audit procedure: trace a sample of shipping documents to
recorded sales transactions correct answers general objective in performing substantive
procedures on an asset account: completeness because it goes from source documents to
financial statements
indicate general objective(s) for each audit procedure: identify related parties (need to be
disclosed in the notes to the financial statements) correct answers general objective in
performing substantive procedures on an asset account: presentation and disclosure
indicate general objective(s) for each audit procedure: vouch selected purchases of securities to
broker advices (receipts) correct answers general objective in performing substantive procedures
on an asset account: existence because we go from FS to SD
indicate general objective(s) for each audit procedure: correct answers general objective in
performing substantive procedures on an asset account:
what is substantive procedures related to? correct answers detection risk
, planning the audit correct answers -determining the requirements for the engagement, including
FS to be audited or any regulatory filings, and the timing of the engagement
-determining the analytical procedures to be applied as risk assessment procedures, the level of
materiality, and the likely need for specialists
-you are not going to analyze specific numbers yet, you want to pay attention to the audibility
communication with predecessor auditors correct answers -successor should initiate
communicate with predecessor auditor before accepting audit engagement
-successor must ask management of client to authorize predecessor auditor to communicate with
them
-it is pre-engagement bc there is not contract yet
engagement letter correct answers to document in WRITING the understanding between client
and auditors
1. objective and scope of the audit
2. auditor and management responsibilities
3. inherent limitations of an audit
4. the applicable financial reporting framework
5. expected form and content of written reports to be issued by the auditors
executory contract correct answers when the engagement letter is accepted by the authorized
client official, it presents an executory contract between auditor and client
2 audit engagement letters that are required correct answers beginning: engagement letter
conclusion of audit: representation letter ( to represent managements responsibilities
an example of a risk factor for misappropriation of assets correct answers an unreliable
accounting system
indicate general objective(s) for each audit procedure: observe the clients physical inventory
correct answers general objective in performing substantive procedures on an asset account:
existence of assets
indicate general objective(s) for each audit procedure: locate on the clients premises a sample of
equipment items listed in the subsidiary plant and equipment ledger correct answers general
objective in performing substantive procedures on an asset account: existence because it goes
from ledger to physical evidence
indicate general objective(s) for each audit procedure: obtain a listing of inventory and reconcile
the total to the general ledger correct answers general objective in performing substantive
procedures on an asset account: valuation because you are crunching the numbers by reconciling
indicate general objective(s) for each audit procedure: trace a sample of shipping documents to
recorded sales transactions correct answers general objective in performing substantive
procedures on an asset account: completeness because it goes from source documents to
financial statements
indicate general objective(s) for each audit procedure: identify related parties (need to be
disclosed in the notes to the financial statements) correct answers general objective in
performing substantive procedures on an asset account: presentation and disclosure
indicate general objective(s) for each audit procedure: vouch selected purchases of securities to
broker advices (receipts) correct answers general objective in performing substantive procedures
on an asset account: existence because we go from FS to SD
indicate general objective(s) for each audit procedure: correct answers general objective in
performing substantive procedures on an asset account:
what is substantive procedures related to? correct answers detection risk
, planning the audit correct answers -determining the requirements for the engagement, including
FS to be audited or any regulatory filings, and the timing of the engagement
-determining the analytical procedures to be applied as risk assessment procedures, the level of
materiality, and the likely need for specialists
-you are not going to analyze specific numbers yet, you want to pay attention to the audibility
communication with predecessor auditors correct answers -successor should initiate
communicate with predecessor auditor before accepting audit engagement
-successor must ask management of client to authorize predecessor auditor to communicate with
them
-it is pre-engagement bc there is not contract yet
engagement letter correct answers to document in WRITING the understanding between client
and auditors
1. objective and scope of the audit
2. auditor and management responsibilities
3. inherent limitations of an audit
4. the applicable financial reporting framework
5. expected form and content of written reports to be issued by the auditors
executory contract correct answers when the engagement letter is accepted by the authorized
client official, it presents an executory contract between auditor and client
2 audit engagement letters that are required correct answers beginning: engagement letter
conclusion of audit: representation letter ( to represent managements responsibilities
an example of a risk factor for misappropriation of assets correct answers an unreliable
accounting system
