Question

For each of the following specific audit procedures, identify the category (assertions about classes of transactions and events or assertions about account balances) and the primary assertion being tested. a. Sending a written request to the entity's customers requesting that they report the amount owed to the entity. b. Examining large sales invoices for a period of two days before and after year-end to determine if sales are recorded in the proper period. c. Agreeing the total of the accounts receivable subsidiary ledger to the accounts receivable general ledger account. d. Discussing the adequacy of the allowance for doubtful accounts with the credit manager. e. Comparing the current-year gross profit percentage with the gross profit percentage for the last four years. f. Examining a new plastic extrusion machine to ensure that this major acquisition was received. g. Watching the entity's warehouse personnel count the raw materials inventory. h. Performing test counts of the warehouse personnel's count of the raw material. i. Obtaining a letter from the entity's attorney indicating that there were no lawsuits in progress against the entity. j. Tracing the prices used by the entity's billing program for pricing sales invoices to the entity's approved price list. k. Reviewing the general ledger for unusual adjusting entries. a. b. d. e. f. Answer is complete but not entirely correct. Category of Assertion Assertion Assertions about classes of transactions and events * Completeness Assertions about classes of transactions and events Accuracy, valuation, and allocation Assertions about classes of transactions and events % Completeness Assertions about classes of transactions and events Accuracy, valuation, and allocation Assertions about classes of transactions and events X Accuracy, valuation, and allocation Assertions about classes of transactions and events X Accuracy, valuation, and allocation Assertions about classes of transactions and events X Accuracy, valuation, and allocation Assertions about classes of transactions and events Accuracy, valuation, and allocation Assertions about classes of transactions and events ® Accuracy, valuation, and allocation/Completeness Assertions about classes of transactions and events Accuracy, valuation, and allocation Assertions about classes of transactions and events X Accuracy, valuation, and allocation 9. h. i k.

Answer 1

Audit Procedures Assertion (Management assertions) (Category of assertion) Existence Conformation Account balances, Sr. No. Category of Assertions Sending a written request to the client's customers requesting that they report the amount owed to the entity Examining large sales invoices for a period of two days before and after year-end to determine if sales are recorded in the proper period. Cutoff Inspection of records or documents Transactions and events Account balances Agreeing the total of the accounts receivable subsidiary ledger to the accounts receivable general ledger account. completeness Inspection of records or documents OR re- performance Valuation and allocation Inquiry Account balances Analytical Procedures Account balances allocation Discussing the adequacy of the allowance for doubtful accounts with the credit manager. Comparing the current-year gross profit percentage with the gross profit percentage for the last four years. Examining a new plastic extrusion machine to ensure that this major acquisition was received. Watching the entity's warehouse personnel count the raw materials inventory. Performing test counts of the warehouse personnel's count of the raw material. Existence Inspection of tangible assets Account balances Observation Account balances Completeness or existence Completeness or existence Re-performance Account balances Obtaining a letter from the client's attorney indicating that there were no lawsuits in progress against the client. Valuation and allocation OR Completeness Confirmation Account balances Tracing the prices used by the client's billing program for pricing sales invoice to the entity's approved price list Accuracy Inspection of records or documents OR re- performance Transactions and events Valuation and Reviewing the general ledger for unusual adjusting entries. allocation Scanning Account balances