Acc 491 Week 3
Individual Text Assignment Chapters 5, 6, and 7
Karen L. Spencer
ACC/491 Contemporary Auditing I
December 3, 2012
Kimberly Jordan, MBA
Individual Text Assignment Chapters 5, 6, and 7
Chapter 5
Comprehensive Question
5-30
(Assertions) In planning the audit of a client’s financial statements, an auditor identified the following issues that need attention.
Required
Identify the assertion for items 1 through 11.
1. The allowance for doubtful accounts is fairly presented in amount. Valuation and allocation
2. All accounts payable owed as of the balance sheet date are included in the financial statements. Completeness
3. All purchase returns recorded in the general ledger are valid. Existence and occurrence
4. There is a risk that purchases made in the last week of the month might be recorded in the following period. Completeness
5. The client may have factored accounts receivable. Rights and obligations
6. The client has used special-purpose entries to finance a building. Neither the building nor the debt is included in the financial statement. Completeness
7. A retail client values its inventory using the retail method of accounting. Valuation and allocation
8. A construction client uses the percentage of completion method for recognizing revenues. Existence and occurrence
9. A client has a defined benefit pension plan and does not have competent employees to write footnote disclosures. Presentation and disclosure
10. A client acquired a subsidiary company and paid a high amount of goodwill when the stock market, and resulting values, were at all-time highs. Valuation and allocation
11. A client financed the acquisition of assets using preferred stock that pays a 3 percent dividend and must be redeemed from the shareholders next year. Presentation and disclosure
Chapter 6
Comprehensive Question
6-22
(Audit Evidence) During the course of an audit, the auditor
Karen L. Spencer
ACC/491 Contemporary Auditing I
December 3, 2012
Kimberly Jordan, MBA
Individual Text Assignment Chapters 5, 6, and 7
Chapter 5
Comprehensive Question
5-30
(Assertions) In planning the audit of a client’s financial statements, an auditor identified the following issues that need attention.
Required
Identify the assertion for items 1 through 11.
1. The allowance for doubtful accounts is fairly presented in amount. Valuation and allocation
2. All accounts payable owed as of the balance sheet date are included in the financial statements. Completeness
3. All purchase returns recorded in the general ledger are valid. Existence and occurrence
4. There is a risk that purchases made in the last week of the month might be recorded in the following period. Completeness
5. The client may have factored accounts receivable. Rights and obligations
6. The client has used special-purpose entries to finance a building. Neither the building nor the debt is included in the financial statement. Completeness
7. A retail client values its inventory using the retail method of accounting. Valuation and allocation
8. A construction client uses the percentage of completion method for recognizing revenues. Existence and occurrence
9. A client has a defined benefit pension plan and does not have competent employees to write footnote disclosures. Presentation and disclosure
10. A client acquired a subsidiary company and paid a high amount of goodwill when the stock market, and resulting values, were at all-time highs. Valuation and allocation
11. A client financed the acquisition of assets using preferred stock that pays a 3 percent dividend and must be redeemed from the shareholders next year. Presentation and disclosure
Chapter 6
Comprehensive Question
6-22
(Audit Evidence) During the course of an audit, the auditor