Identify one or more types of procedures being employed in each situation described below (vouching, tracing, recalculation, observation, and so on):
1. An auditor uses audit software to select vendors’ accounts payable with debit balances and compares amounts and computation with cash disbursements and vendor credit memos.
2. An auditor examines property insurance policies and checks insurance expense for the year. The auditor then reviews the expense in light of changes and ending balances in capital asset accounts.
3. An auditor uses audit software to test perpetual inventory records for items that have not been used in production for three months or more. The auditee states that the items are obsolete and have already been written down. The auditor checks journal entries to support the auditee’s statements.
4. An auditor tests cash remittance advices to see that allowances and discounts are appropriate and that receipts are posted to the correct customer accounts in the right amounts and reviews the documents supporting unusual discounts and allowances.
5. An auditor watches the auditee take a physical inventory. A letter is also received from a public warehouser stating the amounts of the auditee’s inventory stored in the warehouse.
The company’s cost flow assumption, FIFO (first in, first out), is then tested by the auditor’s computer software program.