Auditing discussion questions

Auditing discussion questions
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Provide an example of a substantive test or a controls test (identify if it’s a test of controls or substantive test) that an auditor may want to perform to test the sales cycle (be specific). If the test involves multiple steps make sure to list all of them.
Substantive tests ought to be carried out on the accounts receivable, cash, allowance for doubtful accounts and bad debt expense.
Auditor should obtain understanding from client on revenue recognition approaches.
Evaluate whether there is adequate documentation on the sales cycle
Determine the internal control on sales.
Use of appropriate substantive tests taking into account timing, sample size and audit procedures.
Obtain sufficient appropriate evidence for sales collection cycle.
Provide an example of a substantive test or a controls test (identify if it’s a test of controls or substantive test) that an auditor may want to perform to test the cash collection cycle (be specific). If the test involves multiple steps make sure to list all of them.
Test of control first involves understand the internal controls in place.
Identify the measures to ensure that receipt of cash is adequately recorded, including the safes where cash is deposited.
Assess control risk to ensure that cash received is recorded and there is proof of receipts at the time transactions took place.
Ensure that cash transactions are summarized.
Provide an example of a substantive test or a controls test (identify if it’s a test of controls or substantive test) that an auditor may want to perform to test the payroll cycle (be specific). If the test involves multiple steps make sure to list all of them.
Analytical procedures are part of substantive tests to ensure that there is no overstatement.
Ensure that employees and deductions exist through verifying documentation that payroll is complete.
Deductions should be recomputed to ensure there is accuracy of the reported amounts.
Ensure that documentation adequately covers all the relevant benefits deductions and classification.
Test of detail to ensure that deductions have supporting documents and that there are all calculations and deductions as well as agreement on net pay to bank.
Calculate the payroll costs versus the reported costs to ensure that there are no abnormal changes on the payroll.
Provide an example of a substantive test or a controls test (identify if it’s a test of controls or substantive test) that an auditor may want to perform to test the inventory cycle (be specific). If the test involves multiple steps make sure to list all of them.
Substantive tests on the inventory cycle:
Review of financial statements to ensure that there has been disclosure on valuation of inventory.
Performing analytical procedures and verifying inventory valuation used to ensure that the valuation is correctly applied.
Verifying accuracy of inventory listings as well as reconciling balances between physical amounts and listed amounted.
Confirm existence of inventory and that the acquisition cycle reflects the correct details of inventory.
Determine the rights and obligations pertaining to a company’s inventory through checking agreements and evidence of ownership
Verify that the balance sheet figure reflects the same amount with that of Cost of Goods sold in the income statement.
Explain the relationships among audit services, attestation services, and assurance services, and give an example of each.
Assurance services refer to independent professional services that provide more information meant for decision making. An example of attestation is assessing information systems reliability. Attestation services refer to the assurance service where accounting and auditing firms give report on reliability assertion, which is another party’s responsibility. This may take the form of assisting clients on agreed-upon procedures. Audit services refer to attestations where auditors carry out audit procedures, and examining historical financial statements is an example of auditing
What are the purposes of the scope paragraph in the auditor’s report? Identify the most important information included in the scope paragraph. Explain the importance.