Management assertions for the financial statements referenced inPCAOB Auditing Standards are:Existence, occurrenceCompletenessRights,...Management assertions for...

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Accounting

Management assertions for the financial statements referenced inPCAOB Auditing Standards are:
Existence, occurrence
Completeness
Rights, obligations
Valuation, allocation
Presentation and disclosure
The purpose of tests of controls is to permit the auditor toassess whether properly designed controls operate effectivelyenough to prevent or detect material misstatements that would makethese managements assertions wrong.
Required:
For each of the following audit procedures identify whether theprocedure is:
(a) directed at a control or at an amount ordisclosure, or both, and
(b) what assertion (or assertions) is (are)targeted.
Accounts, Classes of Transactions
Audit Procedure
Directed at:
Assertion:
All
Inquire who controls passwords for IT access.
Sales, Receivables, Inventory
Examine document packages for items that have been shipped forinclusion of a customer order, credit approval, and shippingdocument. Make sure the documents are properly matched andcomplete, with all required signatures and trace amounts to thesales journal, accounts receivable subsidiary ledger, and inventoryfiles.
Payroll
For the Hourly Payroll Expense account, multiply the averagenumber of workers times the average number of hours worked per yeartimes the average hourly rate. Compare to the total posted annualamount.
Cash
Inspect the client-prepared bank reconciliation for each monthof the year, recalculate the amounts, examine the supporting bankstatements, and trace the cash amount to the general ledger.
Fixed assets
Obtain a list of fixed assets and physically look at theassets.
Long-term debt
Read the contract related to each of the company’s long-termborrowings and agree the terms of the contracts to the financialstatements notes.
Cash, Long-term debt
For each item of long-term debt that existed both at thebeginning and end of the year, inspect the debt contracts and thecompany’s analysis of the discounted debt amount and its analysisof violation of debt covenants and look for whether the detailsagree. Recalculate the amounts, and examine recorded entries andbank statements for cash disbursements for debt repayments. Usingthat information, determine whether the company has been inviolation of any debt covenants during the year.
Prepaid rent
Using the beginning financial statement amount, cash receiptsand cash disbursements evidence, and the lease agreement, calculateyear-end prepaid rent and agree that amount to what is shown in thegeneral ledger.
Inventory
At the end of the last day in the fiscal year, go to theclient’s shipping area and record the last shipment; trace theshipment into the client’s records.

Accounts, Classes of Transactions	Audit Procedure	Directed at:	Assertion:
All	Inquire who controls passwords for IT access.
Sales, Receivables, Inventory	Examine document packages for items that have been shipped forinclusion of a customer order, credit approval, and shippingdocument. Make sure the documents are properly matched andcomplete, with all required signatures and trace amounts to thesales journal, accounts receivable subsidiary ledger, and inventoryfiles.
Payroll	For the Hourly Payroll Expense account, multiply the averagenumber of workers times the average number of hours worked per yeartimes the average hourly rate. Compare to the total posted annualamount.
Cash	Inspect the client-prepared bank reconciliation for each monthof the year, recalculate the amounts, examine the supporting bankstatements, and trace the cash amount to the general ledger.
Fixed assets	Obtain a list of fixed assets and physically look at theassets.
Long-term debt	Read the contract related to each of the company’s long-termborrowings and agree the terms of the contracts to the financialstatements notes.
Cash, Long-term debt	For each item of long-term debt that existed both at thebeginning and end of the year, inspect the debt contracts and thecompany’s analysis of the discounted debt amount and its analysisof violation of debt covenants and look for whether the detailsagree. Recalculate the amounts, and examine recorded entries andbank statements for cash disbursements for debt repayments. Usingthat information, determine whether the company has been inviolation of any debt covenants during the year.
Prepaid rent	Using the beginning financial statement amount, cash receiptsand cash disbursements evidence, and the lease agreement, calculateyear-end prepaid rent and agree that amount to what is shown in thegeneral ledger.
Inventory	At the end of the last day in the fiscal year, go to theclient’s shipping area and record the last shipment; trace theshipment into the client’s records.

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Accounts Classes of Transactions Audit Procedure Directed at Assertion All Inquire who controls passwords for IT access Control Obligation Sales Receivables Inventory Examine document packages for items that have been shipped for inclusion of a customer order credit approval and shipping document Make sure the documents are properly matched and complete with all required signatures and trace amounts to the sales journal accounts receivable See Answer

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In: AccountingManagement assertions for the financial statements referenced inPCAOB Auditing Standards are:Existence, occurrenceCompletenessRights,...Management assertions for the financial statements referenced inPCAOB Auditing Standards are:Existence, occurrenceCompletenessRights, obligationsValuation, allocationPresentation and disclosureThe purpose of tests of controls is to permit the auditor toassess whether properly designed controls operate effectivelyenough to prevent or detect material misstatements that would makethese managements assertions wrong.Required:For each of the following audit procedures identify whether theprocedure is:(a) directed at a control or at an amount ordisclosure, or both, and(b) what assertion (or assertions) is (are)targeted.Accounts, Classes of TransactionsAudit ProcedureDirected at:Assertion:AllInquire who controls passwords for IT access.Sales, Receivables, InventoryExamine document packages for items that have been shipped forinclusion of a customer order, credit approval, and shippingdocument. Make sure the documents are properly matched andcomplete, with all required signatures and trace amounts to thesales journal, accounts receivable subsidiary ledger, and inventoryfiles.PayrollFor the Hourly Payroll Expense account, multiply the averagenumber of workers times the average number of hours worked per yeartimes the average hourly rate. Compare to the total posted annualamount.CashInspect the client-prepared bank reconciliation for each monthof the year, recalculate the amounts, examine the supporting bankstatements, and trace the cash amount to the general ledger.Fixed assetsObtain a list of fixed assets and physically look at theassets.Long-term debtRead the contract related to each of the company’s long-termborrowings and agree the terms of the contracts to the financialstatements notes.Cash, Long-term debtFor each item of long-term debt that existed both at thebeginning and end of the year, inspect the debt contracts and thecompany’s analysis of the discounted debt amount and its analysisof violation of debt covenants and look for whether the detailsagree. Recalculate the amounts, and examine recorded entries andbank statements for cash disbursements for debt repayments. Usingthat information, determine whether the company has been inviolation of any debt covenants during the year.Prepaid rentUsing the beginning financial statement amount, cash receiptsand cash disbursements evidence, and the lease agreement, calculateyear-end prepaid rent and agree that amount to what is shown in thegeneral ledger.InventoryAt the end of the last day in the fiscal year, go to theclient’s shipping area and record the last shipment; trace theshipment into the client’s records.