Questions Chapter 16
What is the objective of AU-C section 500?
How does detection risk get reduced ? what is the audit risk model ? pretend GAAS requires AAR ≤ .05
Controls are ineffective, we assess RoMM as MAX
Which audit approach are we going to take ? What is the Planned Detection Risk ?
Controls are omewhat effective and we assess RoMM as 0.25
Which audit approach will we take?
Which audit approach will we take ?
What is the Planned Detection Risk ?
Controls are effective, we assess RoMM as 0.03
What is the Planned Detection Risk ?
Which assertions relate to Account Balances?
Describe Vouching
Describe Tracing
Are you most concerned with overstatement or understatement when you are auditing
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LIABILITIES
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ASSETS
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REVENUES
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EXENSES
Are you most concerned with Existence or Completeness when you are auditing
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Accounts Receivable
Are you most concerned with Occurrence or Completeness when you are auditing
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Cash Receipts
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Cash Disbursements what are the three types of substantive tests? with which financial statement assertion might the aged trial balance be helpful ?
Which audit report will you issue? while attempting to confirm the client’s accounts receivables – the client will not provide you the necessary information to confirm many of their largest customers.

what are two forms of receivables confirmations ?
Are you going to audit the last 25 entries in Cash Receipts Jnl the prior to 12/31/13 or the first 25 entries after 1/1/14? will you Vouch or Trace ? will you audit the last 25 entries in the Cash Disbursements Jnl prior to Dec. 31 st
or the first 25 entries in the CD Jnl after Jan 1 st
2014? will you Vouch or Trace ?
Accounts Receivable --- Are you going to audit the last 25 entries prior to 12/31/13 or the first 25 entries after 1/1/14? will you Vouch or Trace ? do you want to audit the last 25 orders that were actually shipped prior to 12/31/13 or the first 25 orders that were shipped on January 1, 2014? will you Vouch or Trace ?
With which financial statement assertion, other than cutoff, are we most concerned if we are auditing cash receipts?
You are auditing the last 25 entries in the cash receipts journal prior to 12/31/13. Give an example of evidence that indicates the recorded balance is correct.
You are auditing the last 25 entries in the cash receipts journal prior to 12/31/13. Give an example of evidence that indicates the recorded balance is overstated. with which financial statement assertion (other than cutoff) are we concerned if we are auditing cash disbursements ?
You are auditing the first 25 entries in the cash disbursements journal after 1/1/2014.
Give an example of evidence that indicates the recorded balance is correct.
You are auditing the first 25 entries in the cash disbursements journal after 1/1/2014.
Give an example of evidence that indicates the recorded CASH balance is overstated what does the evidence indicate if we agree the last 25 entries in the Accounts
Receivable account to shipping documents prior to 12/31/13? what does the evidence indicate if we agree the last 25 entries in the Accounts
Receivable balance to shipping documents dated after 1/1/14? what would the evidence indicate if you agree the first 25 shipments of 2014 into the
2014 Accounts Receivable balance? what would the evidence indicate if you agree the first 25 shipments of 2014 into the
2013 Accounts Receivable balance?

What opinion will you issue? While performing substantive tests you detect material misstatements that cause accounts receivable to be materially overstated and the client refuses to correct their financial statements.
What does it imply about the effectiveness of the internal controls if you detect material misstatements while performing substantive tests?