Question

The following are audit procedures from different transaction cycles:

1. Examine sales invoices for evidence of internal verification of prices, quantities, and
extensions.
2. Select items from the client’s perpetual inventory records and examine the items in
the company’s warehouse.
3. Use audit software to foot and cross-foot the cash disbursements journal and trace
the balance to the general ledger.
4. Select a sample of entries in the acquisitions journal and trace each one to a related
vendor’s invoice to determine whether one exists.
5. Examine documentation for acquisition transactions before and after the balance
sheet date to determine whether they are recorded in the proper period.
6. Inquire of the credit manager whether each account receivable on the aged trial balance
is collectible.
7. Compute inventory turnover for each major product and compare with previous years.
8. Confirm a sample of notes payable balances, interest rates, and collateral with lenders.

9. Use audit software to foot the accounts receivable trial balance and compare the balance
with the general ledger.
a. For each audit procedure, identify the transaction cycle being audited.
b. For each audit procedure, identify the type of evidence.
c. For each audit procedure, identify whether it is a test of control or a substantive test.
d. For each substantive audit procedure, identify whether it is a substantive test of transactions,
a test of details of balances, or a substantive analytical procedure.
e. For each test of control or substantive test of transactions procedure, identify the
transaction-related audit objective or objectives being satisfied.
f. For each substantive analytical procedure or test of details of balances procedure,
identify the balance-related audit objective or objectives being satisfied.

Answer 1

	Procedure	b	c	d	e	f
1	Sales & Collection	Recalculation	Substantive	test of transactions	Proper Pricing	NA
2	Inventory &Warehousing	Confirmation	Substantive	test of details of balances	NA	Existence accurancy presentation and disclosure
3	Acquisition & Payment	Recalculation	Substantive	test of transactions	Posting & Summarization	NA
4	Acquisition & Payment	Inspection	Test of control or Substantive	test of transactions	Existence	NA
5	Acquisition & Payment	Inspection	Substantive	test of details of balances	NA	Cutoff
6	Sales & Collection	Inquiry	Substantive	test of details of balances	NA	Valuation
7	Inventory & warehousing	Analytical Procedure	Substantive	analytical procedure	NA	Valuation
8	Capital acquisition and Repayment	Confirmation	Substantive	test of details of balances	NA	Existence accurancy presentation and disclosure
9	Sales & Collection	Recalculation	Substantive	test of details of balances	NA	Detail Tie IN