Auditing ch15 solutions (rubix cube cover)

Topics: Auditor's report, Balance sheet, Auditing Pages: 80 (15918 words) Published: September 22, 2013
CHAPTER 15
Completing the Audit
LEARNING OBJECTIVES

1

2

3

4

5

6

7

8

Describe the balance sheet
account groups that the major
revenue and expense accounts are
associated with, and the
substantive analytical procedures
applied to audit revenues and
expenses.
Outline the overall analytical
procedures to be performed at the
final stage of the audit,
including analysis of the income
statement, the cash flow
statement, financial statement
presentation and disclosures.
Explain the purpose of lawyers’
letters and how they are used at
the completion stage of an audit
to identify any contingencies.
Explain why written management
representations are obtained, and
the items generally included in
the representation letter
including identification of
related parties.
Given a set of facts and
circumstances, classify a
subsequent event by type and
proper treatment in the financial
statements, and outline the
implications of the timing of
discovery of the event for the
auditor’s report.
Explain the final steps for
overall review and evaluation of
audit evidence documented in the
working papers, adjusting entries
resulting from the audit,
engagement quality control
reviews, and how professional
judgment is applied to form the
audit opinion.
Summarize the auditor’s
communications throughout and at
the conclusion of the engagement.
Apply and integrate the chapter
topics to design audit procedures
for detecting misstatements due
to error or fraud at the overall
completion stage of the audit.

Review
Checkpoin
ts
1-3

Exercises
and
Problems
8

7,9,10

4-6

8

7,9,10

7-9

4

8

10-12

1,2,3,6

1

13-18

3

2,3,4,
11,12

19-23

5,7

5,6,13,14

24-26

9

27

Copyright © 2010 McGraw-Hill Ryerson Ltd.

Discussio
n Cases

5

483

POWERPOINT SLIDES
PowerPoint slides are included on this site. Please take special note of: *
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Audit of revenues and expenses, analytical procedures
Audit letters, including: lawyer’s, management written representations Subsequent events
Audit work evaluation, audit conclusion, and form of opinion

SOLUTIONS FOR REVIEW CHECKPOINTS
15.1

Revenue and Expense Accounts
Lease revenue
Franchise revenue
Royalty and license revenue
Repair and maintenance
Interest expense

15.2

Many of the revenue and expense accounts are not material in relation to the financial statements and may be combined with other accounts in the financial statements. These accounts can be audited through analytical procedures. Such procedures compare the account balance to related balance sheet accounts, to sales, to industry averages or to a multiple-year trend to ascertain whether any unusual fluctuations are present. Unusual or unexpected items would have to be investigated and material items vouched to supporting documents.

15.3

Lease revenue
Fixed assets and receivables
Receivables and intangibles
Receivables and investments
Fixed assets and liabilities
Liabilities

These procedures can be used to obtain information about the material accuracy of balances in minor expense accounts:
Analytical comparison of current balances to two or more prior years' balances, looking for unusual fluctuations or lack of change when other information indicates change should have occurred.
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Vouching supporting documents for expense entries to obtain detail evidence about existence/occurrence, valuation, and classification. *
Documents vouched in connection with detail test of controls procedures, if any, performed in the acquisition and expenditure cycle test of controls work.
*

15.4

"Unusual revenue transactions" can cause significant audit evidence and reporting problems when such transactions are designed by management to create inappropriate earnings. These transactions pose a combination of: evidencegathering problems, auditor responsibility for detecting errors and...
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