Indicate the type of error that each of the following audit procedures is designed to or...

Indicate the type of error that each of the following audit procedures is designed to or is likely to disclose:
i) review of the repairs and maintenance account.
ii) confirmation of a portion of accounts receivable.
iii) reconciliation of interest expense with loans payable.

Solutions

Expert Solution

1) Review of Repairs and Maintenance: A review of this account will reveal any error of Principle. It is possible that an amount that should have been capitalized might be debited to Repairs and Maintenance A/c thereby understating the profits or an amount that should have been expensed to Repairs and maintenance may have been capitalized thereby overstating the profits. A review of the major items of Repairs and maintenance A/c will reveal ant such error of principle.

2) Confirmation of a portion of accounts receivable: It is an audit procedure to obtain balance confirmation from customers to ascertain that all payments received from a customer have been properly accounted for and also all sales that are debited to customers are actual sales acknowledged by the customer. This way there will be no overstatement of revenue and no wrong accounting of receipts. Errors of Principle and errors of commission or omission will be revealed.

3) Reconciliation of interest expense with loans payable:The reconciliation will reveal all errors of omission or commission, if any.Interest for the year has to be accrued correctly so asto state the correct profits as well as state the correct liability. Reconciliation of interest expenses with the loans payable will ensure no accrual is omitted.

ekkarill92 answered 1 year ago

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