David, an experienced auditor, is assigned to conduct the audit of a continuing client, Eco Fabrics Ltd.
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Question:
David, an experienced auditor, is assigned to conduct the audit of a continuing client, Eco Fabrics Ltd. To comply with the auditing standard 'ASA500 Audit Evidence', David is planning the following specific procedures:
Procedures | |
1) | Calculating and analyzing the inventory turnover ratio by comparing the cost of goods sold to the average inventory balance during the year. |
2) | Sending confirmations to a sample of Eco Fabrics' customers to verify the outstanding accounts receivable balances. |
3) | Physically observing a selection of significant assets, such as machinery, equipment, or vehicles. |
4) | Examining contracts and agreements with suppliers to ensure that the terms and conditions of purchase orders are accurately reflected in the financial statements. |
5) | Confirming the year-end bank balances by directly communicating with Eco Fabrics' banks. |
Required: write your answer to both Part A and Part B in the space provided below
Part A
For each procedure listed in the table above, indicate the type of evidence-gathering procedure it represents.
Part B
For each audit procedure listed in the table, indicate one specific account balance that is at risk and a key assertion for the account balance that is likely to be affected with a brief explanation.
Related Book For
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
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