Question

In: Accounting

When there is a high risk that expenses are understated, which of the following assertions is...

When there is a high risk that expenses are understated, which of the following assertions is most likely to be affected?

		Occurrence.
		Accuracy.
		Completeness.
		Valuation and allocation.

The completeness assertion would be violated if:

		the allowance for doubtful accounts was understated.
		unbilled shipments had occurred during the period.
		the balance of accounts payable was overstated.
		all of the above would violate the completeness assertion.

ShoeWorld sells a large range of sporting shoe brands from different manufacturers, and a large amount of inventory is on consignment. The key audit risk to be addressed at year-end is:

		valuation of inventory.
		rights and obligations in relation to inventory.
		existence of inventory.
		classification of inventory.

Expert Solution

Audit Assertions are the implicit or explicit claims and representations made by the management responsible for the preparation of financial statements regarding the appropriateness of the various elements of financial statements.Audit Assertions are also known as Management Assertions and Financial Statement Assertions.

ASSERTION

EXPLAINATION

OCCURANCE

Transactions and events disclosed in the financial statements have occurred and relate to the entity.

COMPLETENESS

All transactions, balances, events and other matters that should have been disclosed have been disclosed in the financial statements.

CLASSIFICATION AND UNDERSTANDABILITY

Disclosed events, transactions, balances and other financial matters have been classified appropriately and presented clearly in a manner that promotes the understandability of information contained in the financial statements.

ACCUARCY AND VALUATION

Transactions, events, balances and other financial matters have been disclosed accurately at their appropriate amounts.

Assertions assist auditors in considering a wide range of issues that are relevant to the authenticity of financial statements. The consideration of management assertions during the various stages of audit helps to reduce the audit risk.

ekkarill92 answered 1 year ago

The risk associated with liabilities is that they are understated. Which of the following are true...

The risk associated with liabilities is that they are understated. Which of the following are true (select all that apply): A) Reviewing invoices before and after year end is an effective substantive audit test for ensuring completeness. B) Discussing pending legal cases with the legal department is an effective method of ensuring completeness for legal liabilities. C. Using prenumbered receiving reports and accounting for all receiving reports completed during the period is an effective internal control for ensuring completeness. D....

Create a test to assess appropriate assertions for designated high-risk business transactions.

Which of the following is a characteristic of domestic operations? High financial risk. High cargo risk....

Which of the following is a characteristic of domestic operations? High financial risk. High cargo risk. Transport mainly by truck and rail. Significant paperwork involved.

1. A large amount of ________ expenses will lead to a high amount of risk since...

1. A large amount of ________ expenses will lead to a high amount of risk since they will ________ with revenues a) Variable; change b) Variable; not change c) Fixed; change d) Fixed; not change 2. The gap between cash inflows and cash outflows will likely be most harmful to a firm that a) Has a large amount of fixed costs b) Has a large amount of variable costs c) Has materials as its largest expense d) Has labor as...

In auditing, which accounts/assertions will have the highest inherent risk for a food and beverage company?...

In auditing, which accounts/assertions will have the highest inherent risk for a food and beverage company? Please provide examples.

List 2 assertions for each account below & the risk associated with each account/assertions Sales Returns...

List 2 assertions for each account below & the risk associated with each account/assertions Sales Returns & allowances Sales Discounts Warranty Liability Sales Tax Payable Deferred Revenue Repair & Maintenance Expense Rent Expense Disposable Expense Cost of Goods Sold Equipment Accumulated Depreciation Accounts Payable

When referringto risk, which of the following statements is reasonable?Although risk means taking a...

When referring to risk, which of the following statements is reasonable?Although risk means taking a chance at losing, your business is likely to always turn a profit.Good business strategy encourages less risk, because the least risky ventures usually make more profit.Sizeable risks can lead to substantial profits, if the business takes calculated risks and captures good opportunities.Although risk means taking a chance, a start-up will usually manage to get off the ground faster if the stakes are high.

Which assertions may be supported by evidence obtained when an auditor traces items recorded in inventory...

Which assertions may be supported by evidence obtained when an auditor traces items recorded in inventory to purchase documents? Rights & obligations and completeness Rights & obligations and valuation & allocation Valuation & allocation and completeness Valuation & allocation and existence

12. when discussing acceptable audit risk (AAR) and the audit risk model which of the following...

12. when discussing acceptable audit risk (AAR) and the audit risk model which of the following statements is true A. AAR is objectively determined by the auditor B. When the auditor decides on a lower acceptable audit risk it means the auditor wants to be more certain that the financial statements are not materially misstated C. AAR is the risk that the auditor is willing to take that the financial statements are fairly stated D. The terms audit assurance overall...

For the following pairs of assertions, indicate which do not comply with our rules for setting...

For the following pairs of assertions, indicate which do not comply with our rules for setting up hypotheses and why (the subscripts 1 and 2 differentiate between quantities for two different populations or samples): (a) H0: μ = 100, Ha: μ > 100 These hypotheses comply with our rules. H0 cannot include equality, so these hypotheses are not in compliance. Each μ is a statistic, so these hypotheses do not comply with our rules. The asserted value in H0 should...